Indian Oil Corporation (INDOIL) 378

Result Update Rating matrix Rating : Buy Target : 425 Target Period : 12 months Potential Upside : 12% What s changed? Target Changed from 405 to 425 EPS FY16E Changed from 34.9 to 46.4 EPS FY17E Changed from 33.4 to 37.6 Rating Changed from Hold to Buy Quarterly performance Q3FY16 Q3FY15 YoY (%) Q2FY16 QoQ (%) Revenue 83,461.9 107,073.6-22.1 85,385-2.3 EBITDA 5,242.0-2,477.0-311.6 694.9 654.4 EBITDA (%) 6.3-2.3 859 bps 0.8 547 bps PAT 3,056.9-2,636.8-215.9-329.2-1,028.7 Key financials Crore FY14 FY15 FY16E FY17E Revenues 473,396.2 437,526.1 346,719.8 320,219.3 EBITDA 15,792.1 10,147.1 20,550.9 19,454.3 Net Profit 7,019.1 5,273.0 11,267.3 9,138.0 EPS ( ) 28.9 21.7 46.4 37.6 Valuation summary FY14 FY15E FY16E FY17E P/E 13.1 17.4 8.1 10.0 Target P/E 14.7 19.6 9.2 11.3 EV / EBITDA 5.8 9.0 4.5 4.7 P/BV 1.4 1.4 1.2 1.1 RoNW (%) 10.6 7.8 15.0 11.4 RoCE (%) 6.3 4.6 12.2 10.3 Stock data Particular Amount Market Capitalization ( Crore) 91,776.5 Total Debt (FY15) ( Crore) 55,245.0 Cash and Investments (FY15) ( Crore) 10,111.9 EV ( Crore) 136,909.6 52 week H/L 465/312 Equity capital ( Crore) 2,428.0 Face value ( ) 10.0 Price performance Return % 1M 3M 6M 12M HPCL (20.6) (7.3) (21.8) 15.4 BPCL (13.2) (13.1) (11.2) 9.5 IOCL (17.1) (10.7) (6.1) 15.6 ONGC (12.7) (18.5) (28.3) (44.2) Research Analyst Mayur Matani mayur.matani@icicisecurities.com Harshal Mehta harshal.mehta@icicisecurities.com February 17, 2016 Indian Oil Corporation (INDOIL) 378 Paradip refinery to enhance complexity Indian Oil Corporation s (IOC) Q3FY16 results were above our estimates on the profitability front. Revenues declined 22.1% YoY to 83461.9 crore on account of lower crude oil prices YoY EBITDA at 5242 crore was above than our estimated EBITDA of 2579.9 crore due to higher-than-expected GRMs of US$6/bbl in Q3FY16 (our estimate: $3.1 /bbl) There was a subsidy burden of 206 crore during the current quarter vs. expectation of nil subsidy burden. PAT during the quarter reported a profit of 3056.9 crore vs. a loss of 2636.8 crore in Q3FY15 Lower crude oil prices to reduce under-recoveries The government s positive move to deregulate diesel prices last year was a major reform step for OMCs. It led to a decline in crude oil gross underrecoveries, with only kerosene and LPG prices under the regulatory regime. The government s scheme of Direct Benefit Transfer (DBT) for LPG cylinders is a step in the right direction and has led to lower gross under-recoveries. Given our assumptions on Brent crude at US$45/barrel and exchange rate of 67/US dollar, we expect gross under-recovery of 31203.4 crore and 33000.8 crore in FY16E and FY17E, respectively. The government decision to cap its sharing of kerosene subsidy at 12/litre and LPG at 18/kg for FY16 and the rest by oil PSUs is a welcome move for OMCs. We assume no downstream subsidy share for FY17E of total under-recoveries. We estimate IOC s net subsidy at 210.4 crore, nil for FY16E, FY17E, respectively, against 1200.5 crore in FY15. Strong GRMs despite inventory losses IOCL reported GRM of US$6/bbl against our estimate of US$3.1/bbl, on account of strong product crack spreads and in spite of inventory losses. We have increased IOC s refining margin estimates by factoring in Asian discount on sourcing of crude from Middle East producers and also, taking into commissioning of the new Paradip refinery. We estimate reported GRMs of $5.7/bbl and $4.9/bbl for FY16E and FY17E, respectively. We estimate throughput of 55.7 MMT and 62.5 MMT for FY16E and FY17E, respectively. With an improvement in IOC s working capital efficiencies on account of diesel price deregulation, DBT for LPG cylinders and decline in crude oil prices, the interest cost has declined 34.3% YoY to 610.4 crore in Q3FY16. We expect interest costs of 3347.2 crore in FY17E against 3435.3 crore in FY15 (decline mainly because of fall in crude oil prices). Recent correction makes stock attractive The successful commissioning of the 15 MMTPA Paradip refinery marks a major shift for IOC as a pivotal player in complex refineries. The refinery would be able to process heavy crude oils with major secondary processing units like FCC, delayed coking unit (DCU), etc and also improve the distillate yield for the company. Hence, an improvement in refining margins will be the key factor to watch along with fuel subsidies. Going forward, marketing margins are expected to normalise over the next two years. Hence, we have a BUY recommendation on the stock with a target price of 425 (based on average of P/BV multiple: 403/share and P/E multiple: 447/share). ICICI Securities Ltd Retail Equity Research

Variance analysis Q3FY16 Q3FY16E Q3FY15 YoY (%) Q2FY16 QoQ (%) Comments Total Revenues 83,461.9 72,062.5 107,073.6-22.1 85,384.8-2.3 Revenue declined YoY due to lower crude oil prices Raw materials costs 68,999.0 59,826.8 100,115.7-31.1 74,233.3-7.1 Employees Cost 1,702.6 1,655.8 1,324.7 28.5 1,627.6 4.6 Other Expenses 7,518.3 8,000.0 8,110.2-7.3 8,829.1-14.8 Total Expenditure 78,219.8 69,482.6 109,550.6-28.6 84,689.9-7.6 EBITDA 5,242.0 2,579.9-2,477.0-311.6 694.9 654.4 EBITDA margins (%) 6.3 3.6-2.3 859 bps 0.8 547 bps Depreciation 1,169.3 1,447.4 1,221.2-4.2 1,128.6 3.6 EBIT 4,072.7 1,132.5-3,698.1-210.1-433.7-1,039.0 Interest 610.4 819.5 929.0-34.3 729.3-16.3 Other Income 650.0 643.2 910.2-28.6 576.5 12.7 Extra Ordinary Item 473.1 0.0 432.4 9.4 426.1 11.0 PBT 4,585.4 956.2-3,284.6-239.6-160.4-2,959.1 Total Tax 1,528.6 262.6-647.8-336.0 168.8 805.6 PAT 3,056.9 693.6-2,636.8-215.9-329.2-1,028.7 Higher-than-expected on account of higher GRMs of US$6 per barrel against expected GRMs of US$3.1 per barrel Income arising out of additional state specific surcharge towards UP entry tax paid in earlier years Key Metrics Exchange rate ( /$) 66.1 66.1 62.0 6.6 65.1 1.5 Under-recoveries ( cr)* 7759.8 7632.9 15981.3-51.4 7189.5 7.9 Lower crude prices lead to lower under-recoveries YoY Downstream share (%) 8.9 0.0 0.0 510020.3 0.1 12,054.0 Subsidy burden of 206.5 crore against expectation of nil subsidy Net Under-recovery ( cr) 206.5 0.0 12.6 1540.0 2.4 8,575.6 Throughput (mmt) 14.4 14.0 13.8 4.4 13.7 5.4 Sales (mmt) 19.1 19.2 18.4 3.7 18.1 5.3 GRM ($/barrel) 6.0 3.1-7.7-177.1 0.9 562.2 inventory losses in the quarter crack spreads (* based on internal estimates) Change in estimates FY16E FY17E ( Crore) Old New % Change Old New % Change Comments Revenue 347,597.4 346,719.8-0.3 382,885.4 320,219.3-16.4 Change crude oil price assumption to $45/bbl EBITDA 17,539.4 20,550.9 17.2 18,528.0 19,454.3 5.0 Higher GRMs estimates has led to increased EBITDA estimate EBITDA Margin (%) 5.0 5.9 88 bps 4.8 6.1 124 bps PAT 8,468.8 11,267.3 33.0 8,098.8 9,138.0 12.8 Reduced Interest cost estimate and increased GRMs contribute to the increased estimate of PAT EPS ( ) 34.9 46.4 33.0 33.4 37.6 12.8 Assumptions Current Earlier FY14 FY15E FY16E FY17E FY16E FY17E Comments Exchange rate ( /$) 60.4 61.1 65.3 67.0 64.8 65.0 Under-recoveries ( cr) 139,869.0 75,614.0 31,203.4 33,000.8 36151.8 Change in crude oil price assumption to $45/bbl from $55/bbl led to lowering of 39,970.5 Under-recovery estimate Downstream share (%) 1.5 3.0 2.1 0.0 0.0 0.0 Net Under-recovery ( cr) 1,082.6 1,200.5 210.4 0.0 3.9 Assuming marginal downstream share for FY16E & no downstream share for 0.0 FY17E Throughput (mmt) 53.1 53.6 55.7 62.5 55.0 62.5 Sales (mmt) 71.1 72.8 75.7 78.5 75.7 78.3 GRM ($/barrel) 4.2 0.3 5.7 4.9 4.8 Increased GRMs due to assumption of 'Asian discount' on sourcing of crude 4.5 from Middle East ICICI Securities Ltd Retail Equity Research Page 2

Company Analysis Favourable reduction in under-recoveries due to lower crude price The government s positive move in H1CY13 to allow OMCs to hike diesel prices by 50 paise/month was a major step to bring down the diesel under-recovery. The consistent diesel price hikes had brought down diesel losses and, subsequently, there was over recovery in diesel sales last year. The government took a bold decision to deregulate diesel prices, which was a major reform step for OMCs. The move to deregulate diesel prices have led to decline in crude oil gross under-recoveries, with only kerosene and LPG prices under the regulatory regime. The government s scheme of Direct Benefit Transfer (DBT) for LPG cylinders is a step in the right direction and has lead to lower gross under-recoveries. The government decision to cap its sharing of kerosene subsidy at 12/litre and LPG at 18/kg for FY16 and the rest by oil PSUs is a welcome move for OMCs. Given our assumptions on Brent crude at US$45/barrel and exchange rate of 67 per US dollar, we expect gross under-recovery of 31203.4 crore and 33000.8 crore in FY16E and FY17E, respectively and net under-recovery at 206 crore and nil for FY16E and FY17E respectively. Exhibit 1: IOC s share of net under-recoveries Year FY13 FY14 FY15 FY16E FY17E Products ( Cr) HSD 92,061.0 62,837.0 10,935.0 0.0 0.0 LPG 39,558.0 46,457.0 39,880.0 18,959.3 22,326.9 SKO 29,410.0 30,575.0 24,799.0 12,244.1 10,673.9 Total 161029.0 139869.0 75614.0 31203.4 33000.8 Sharing Macro (%) Upstream 37.3% 47.9% 56.6% 6.3% 3.1% Downstream 0.6% 1.5% 2.9% 0.8% 0.0% Government 62.1% 50.6% 40.5% 92.8% 96.9% Total 100.0% 100.0% 100.0% 100.0% 100.0% Sharing ( Cr) Upstream 60,000.0 67,022.4 42,822.2 1,980.5 1,009.1 Downstream 1,029.8 2,074.6 2,183.5 256.7 0.0 Government 100,000.0 70,772.0 30,608.3 28,966.2 31,991.7 Total 161029.8 139869.0 75614.0 31203.4 33000.8 IOCL share of net under-recoveries ( Cr) 548.5 1082.6 1200.5 210.4 0.0 ICICI Securities Ltd Retail Equity Research Page 3

Strong GRMs in spite of inventory losses IOCL reported GRM of US$6/bbl against our estimates of US$ 3.1/bbl, on account of strong product crack spreads and inspite of inventory losses. We have increased IOC s refining margin estimates by factoring in Asian discount on sourcing of crude from Middle East producers and also, taking into commissioning of the new Paradip refinery. We estimate reported GRMs of $5.7/bbl and $4.9/bbl for FY16E and FY17E, respectively. We estimate throughput of 55.7 MMT and 62.5 MMT for FY16E and FY17E, respectively. Exhibit 2: Refining margins trend 7.5 6.0 US$ / bbl 4.5 3.0 4.2 5.7 4.9 1.5 2.2 0.3 0.0 FY13 FY14 FY15 FY16E FY17E Exhibit 3: Retail sales trend 100 80 72.5 71.1 72.8 75.7 78.5 (mmt) 60 40 20 0 FY13 FY14 FY15 FY16E FY17E The commissioning of the new 15 MMT refinery complex at Paradip is done and has begun operations in Q4FY16. Hence, we have assumed the throughput will increase from 54.7 MMT in FY15 to 62.5 MMT in FY17E. We assume retail sales to increase from 72.8 MMT in FY15 to 78.5 MMT in FY17E. ICICI Securities Ltd Retail Equity Research Page 4

Interests costs to remain at comfortable levels With an improvement in IOC s working capital efficiencies on account of diesel price deregulation, DBT for LPG cylinders and decline in crude oil prices, the interest cost has declined 34.3% YoY to 610.4 crore in Q3FY16. We expect interest costs of 3347.2 crore in FY17E against 3435.3 crore in FY15 (decline mainly because of fall in crude oil prices). Exhibit 4: Interest cost trend 7000 6409.2 5600 5084.4 crore 4200 2800 3435.3 2690.0 3347.2 1400 0 FY13 FY14 FY15 FY16E FY17E ICICI Securities Ltd Retail Equity Research Page 5

Outlook & Valuation The decline in fuel subsidies will improve the visibility of earnings. However, an improvement in refining margins will be key. We believe the recent price correction has made the stock attractive. Going forward, marketing margins are expected to normalise over the next two years. Hence, we have a BUY recommendation on the stock with a target price of 425 (based on average of P/BV multiple: 403/share and P/E multiple: 447/share). Valuation Valuation based on Price / BV Multiple Adjusted Book Value for FY17E ( Crore) 75303.6 Adjusted number of shares (Crore) 239.9 Adjusted Book Value per share ( ) 313.9 Multiple 1.0 Value of core business ( per share) 313.9 Add: Listed investments (25% discount to CMP)+ Other Investments 89.1 Fair Value per share ( ) 403 Valuation based on P / E multiple Profit after tax for FY17E ( Crore) 9138.0 Less: Other Income adjusted for tax ( Crore) 1992.0 Adjusted profit after tax for FY17E ( Crore) 7146.0 Number of shares (Crore) 239.9 Adjusted EPS for FY17E ( ) 29.8 Multiple 12.0 Fair value per share without investments ( ) 357 Add: Value of Investments ( per share) Listed investments (25% discount to CMP) 58.4 Other Investments 30.7 Fair value per share ( ) 447 Weighted Target Price ( per share) 425 Source: ICICIdirect.com Research Exhibit 5: Valuations Year Sales Sales Gr. EPS EPS Gr. PE RoNW ( Crore) (%) ( ) (%) (x) EV/EBITDA (x) (%) RoCE (%) FY14 473,396.2 8.9 28.9 77.5 13.1 5.8 10.6 6.3 FY15 437,526.1-7.6 21.7-24.9 17.4 9.0 7.8 4.6 FY16E 346,719.8 (20.8) 46.4 113.7 8.1 4.5 15.0 12.2 FY17E 320,219.3-7.6 37.6-18.9 10.0 4.7 11.4 10.3 ICICI Securities Ltd Retail Equity Research Page 6

Company snapshot 600 500 Target Price: 425 400 300 200 100 0 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Jun-11 Event Indian government announced increase in petroleum product prices, eliminated custom duty on crude oil and reduced in excise duties on petrol and diesel Nov-11 Under recoveries on diesel remain high due to depreciation of Indian rupee. Gross under recovery on petroleum products likely to increase sharply QoQ May-12 Petrol prices increased sharply by 7.5-8 per litre Jan-13 The government took a brave and bold decision and asked the oil marketing companies (OMCs) to periodically hike diesel prices by 50 paise/month May-13 Finance ministry plans to implement Export Parity Pricing (EPP) for pricing of petroleum products for refiners from the current trade parity pricing model. The move if implemented would have a huge negative impact on profitability of companies Jun-13 Cabinet clears 10% disinvestment in IOC Oct-14 Government announces Diesel deregulation Oct-14 Government announces gas pricing policy Dec-14 Crude oil prices decline by nearly 50% from the 2014 high's Aug-15 Government of India divests its 10% stake in IOC Feb-16 Prime Minister inaugurates IOC's 15 MMTPA Paradip Refinery Top 10 Shareholders Rank Name Latest Filing Date % O/S Position (m) Change (m) 1 Government of India 31-Dec-15 58.6 1422.2 0.0 2 Oil and Natural Gas Corporation Ltd 31/Dec/15 8.1 334.3 0.0 3 Life Insurance Corporation of India 31-Dec-15 0.8 241.6-14.8 4 Oil India, Ltd. 31/Dec/15 0.0 121.4 0.0 5 IOC BRPL Merger Scheme Trust 31-Dec-15 0.0 58.3 0.0 6 The Vanguard Group, Inc. 31/Dec/15 0.0 15.6-0.1 7 Norges Bank Investment Management (NBIM) 31-Dec-14 0.0 11.3 3.9 8 Reliance Capital Asset Management Ltd. 31/Dec/15 0.0 9.4 0.5 9 Birla Sun Life Asset Management Company Ltd. 31-Dec-15 0.0 7.2 0.5 10 Goldman Sachs Asset Management (India) Private Ltd. 31/Dec/15 0.0 6.5 0.0 Source: Reuters, ICICIdirect.com Research Shareholding Pattern (in %) Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Promoter 68.6 68.6 68.6 58.6 58.6 FII 2.6 2.6 2.4 3.3 3.9 DII 4.4 4.6 4.7 13.6 12.9 Others 24.4 24.2 24.3 24.6 24.7 Recent Activity Investor name Investor name Investor name Value(m) Shares(m) Investor name Value(m) Shares(m) Tamboli (Piyush Indulal) 6.41 1.03 Life Insurance Corporation of India -96.01-14.83 L&T Investment Management Limited 4.78 0.75 Brandes Investment Partners, L.P. -4.47-0.73 HDFC Asset Management Co., Ltd. 3.19 0.50 JM Financial Asset Management Pvt. Ltd. -1.26-0.20 Reliance Capital Asset Management Ltd. 3.22 0.50 DSP BlackRock Investment Managers Pvt. Ltd. -0.54-0.09 Tata Asset Management Limited 2.98 0.46 The Vanguard Group, Inc. -0.56-0.09 Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 7

Financial summary Profit and loss statement Crore (Year-end March) FY14 FY15 FY16E FY17E Revenue 473,396.2 437,526.1 346,719.8 320,219.3 Growth (%) 5.9-7.6-20.8-7.6 (Inc.)/(Dec.) in stock in trade -1153.0 8216.1-1395.3 0.0 Raw material Costs 227012.0 205049.9 142636.8 142506.8 Purchase of Products 196237.2 177533.9 145534.3 118969.1 Employee Costs 6619.0 7104.8 8690.2 9289.2 Other Expenditure 28889.0 29474.4 30702.9 30000.0 Op. Expenditure 457604.2 427379.1 326168.9 300765.0 EBITDA 15,792.1 10,147.1 20,550.9 19,454.3 Growth (%) 14.9-35.7 102.5-5.3 Depreciation 5760.1 4528.7 4800.1 6200.0 EBIT 10032.0 5618.4 15750.8 13254.3 Interest 5084.4 3435.3 2690.0 3347.2 Other Income 4978.0 5812.1 3704.2 2973.1 PBT 9925.5 7995.3 16765.0 12880.2 Growth (%) 75.7-19.4 109.7-23.2 Tax 2906.4 2722.3 5497.8 3742.2 Reported PAT 7,019.1 5,273.0 11,267.3 9,138.0 Growth (%) 40.2-24.9 113.7-18.9 EPS 28.9 21.7 46.4 37.6 Cash flow statement Crore (Year-end March) FY14 FY15 FY16E FY17E Profit after Tax 7,019.1 5,273.0 11,267.3 9,138.0 Less: Dividend Paid 2,471.3 1,928.7 4,261.1 4,261.1 Add: Depreciation 5,760.1 4,528.7 4,800.1 6,200.0 Add: Others 0.0 0.0 0.0 0.0 Cash Profit 10,411.4 8,977.1 12,106.3 11,376.9 Increase/(Decrease) in CL 19,196.9 3,119.5 4,475.9-4,259.4 (Increase)/Decrease in CA -3,468.1 36,119.9 12,006.5 7,920.6 CF from Operating Activities 26140.2 48216.4 28588.7 15038.1 Purchase of Fixed Assets 23,640.5 10,275.6 12,365.1 10,000.0 (Inc)/Dec in Investments -4,923.0-305.3 0.0 0.0 Others 1.0 1.0 2.0 3.0 CF from Investing Activities -28,563.5-10,580.9-12,365.1-10,000.0 Inc/(Dec) in Loan Funds 4,250.3-38,765.7-1,000.0-5,500.0 Inc/(Dec) in Sh. Cap. & Res. 320.0-1,366.5 0.0 0.0 Others 1.0 1.0 2.0 3.0 CF from financing activities 4,570.3-40,132.2-1,000.0-5,500.0 Change in cash Eq. 2,147.0-2,496.6 15,223.6-461.9 Op. Cash and cash Eq. 461.5 2,608.5 111.9 15,335.5 Cl. Cash and cash Eq. 2,608.5 111.9 15,335.5 14,873.6 Balance sheet Crore (Year-end March) FY14 FY15 FY16E FY17E Source of Funds Equity Capital 2,428.0 2,428.0 2,428.0 2,428.0 Preference capital 0.0 0.0 0.0 0.0 Reserves & Surplus 63,564.1 65,542.0 72,548.2 77,425.2 Shareholder's Fund 65,992.1 67,970.0 74,976.2 79,853.1 Loan Funds 94,010.7 55,245.0 54,245.0 48,745.0 Deferred Tax Liability 5,616.2 6,720.2 7,020.2 7,320.2 Minority Interest 0.0 0.0 0.0 0.0 Source of Funds 165,619.0 129,935.2 136,241.4 135,918.3 Application of Funds Gross Block 112,609.0 121,685.2 148,685.2 158,685.2 Less: Acc. Depreciation 49,660.2 55,433.8 60,868.8 67,068.8 Net Block 62,948.8 66,251.5 87,816.5 91,616.5 Capital WIP 33,879.2 36,323.5 22,323.5 22,323.5 Total Fixed Assets 96,828.0 102,575.0 110,140.0 113,940.0 Investments 23,594.2 23,899.5 23,899.5 23,899.5 Inventories 64,697.4 45,543.9 44,646.1 41,233.7 Debtor 11,023.1 6,758.2 6,649.4 6,141.2 Cash 2,608.5 111.9 15,335.5 14,873.6 Loan & Advance, Other CA 53,662.6 40,961.1 29,961.1 25,961.1 Total Current assets 131,991.6 93,375.0 96,592.1 88,209.6 Current Liabilities 60,016.4 62,192.5 45,596.0 42,111.0 Provisions 26,778.4 27,721.8 48,794.1 48,019.7 Total CL and Provisions 86,794.8 89,914.3 94,390.2 90,130.8 Net Working Capital 45,196.8 3,460.7 2,202.0-1,921.1 Miscellaneous expense 0.0 0.0 0.0 0.0 Application of Funds 165,619.0 129,935.2 136,241.4 135,918.3 Key ratios (Year-end March) FY14 FY15 FY16E FY17E Per share data ( ) Book Value 271.8 279.9 308.8 328.9 Cash per share 10.7 0.5 63.2 61.3 EPS 28.9 21.7 46.4 37.6 Cash EPS 52.6 40.4 66.2 63.2 DPS 8.7 6.6 15.0 15.0 Profitability & Operating Ratios EBITDA Margin (%) 3.3 2.3 5.9 6.1 PAT Margin (%) 1.5 1.2 3.2 2.9 Fixed Asset Turnover (x) 4.9 4.3 3.1 2.8 Inventory Turnover (Days) 49.9 38.0 47.0 47.0 Debtor (Days) 8.5 5.6 7.0 7.0 Current Liabilities (Days) 46.3 51.9 48.0 48.0 Return Ratios (%) RoE 10.6 7.8 15.0 11.4 RoCE 6.3 4.6 12.2 10.3 RoIC 7.1 5.1 15.2 12.8 Valuation Ratios (x) PE 13.1 17.4 8.1 10.0 Price to Book Value 1.4 1.4 1.2 1.1 EV/EBITDA 5.8 9.0 4.5 4.7 EV/Sales 0.4 0.3 0.4 0.4 Leverage & Solvency Ratios Debt to equity (x) 1.4 0.8 0.7 0.6 Interest Coverage (x) 2.0 1.6 5.9 4.0 Debt to EBITDA (x) 6.0 5.4 2.6 2.5 Current Ratio 1.5 1.0 1.0 1.0 Quick ratio 0.8 0.5 0.6 0.5. ICICI Securities Ltd Retail Equity Research Page 8

ICICIdirect.com coverage universe (Oil & Gas) CMP M Cap EPS ( ) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%) Sector / Company ( ) TP( ) Rating ( Cr) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E Aban Offshore (ABALLO) 149 145 Sell 861 88.7 9.7 26.7 1.7 15.4 5.6 6.2 7.9 7.1 9.0 6.0 6.6 9.5 1.1 2.8 Cairn India (CAIIND) 123 128 Hold 23,329 23.9 8.0 6.4 5.1 15.3 19.2 2.6 6.8 7.6 10.1-0.2 0.2 7.6 2.5 2.0 GAIL (India) (GAIL) 317 400 Buy 40,211 24.0 17.1 24.1 13.2 18.5 13.2 10.4 11.3 8.3 9.6 7.6 10.3 10.4 7.1 9.3 Gujarat Gas (GUJGAS) 513 520 Hold 7,063 32.2 12.3 32.4 15.9 41.7 15.9 9.1 13.1 8.4 16.6 10.3 17.4 22.3 8.2 18.2 Gujarat State Petronet (GSPL) 127 152 Buy 7,150 7.3 8.0 10.8 17.4 15.8 11.7 9.0 9.2 7.0 15.2 14.1 17.6 11.3 11.3 13.5 Gulf Oil Lubricants (GULO) 475 575 Buy 2,355 15.6 20.0 23.0 30.4 23.7 20.6 18.5 14.9 13.3 30.9 34.5 34.4 41.4 39.9 35.8 Hindustan Petroleum (HINPET) 701 820 Buy 23,765 80.6 88.4 85.0 8.7 7.9 8.2 7.8 6.1 6.0 10.2 11.4 10.5 17.1 16.8 14.8 Indian Oil Corporation (INDOIL) 378 425 Buy 91,777 21.7 46.4 37.6 17.4 8.1 10.0 9.0 4.5 4.7 4.6 12.2 10.3 7.8 15.0 11.4 Indraprastha Gas (INDGAS) 524 595 Buy 7,336 31.3 30.7 38.1 16.8 17.1 13.8 9.1 8.7 7.1 28.7 26.1 26.9 20.9 17.8 18.8 Mangalore Refinery (MRPL) 58 70 Buy 10,165-9.8 0.9 9.6-5.9 65.6 6.0-4.3 19.4 5.1-17.9 2.3 17.4-32.3 2.8 24.6 Oil India Limited (OILIND) 320 360 Buy 19,236 41.7 37.8 29.3 7.7 8.5 10.9 4.6 4.3 5.1 9.4 8.8 6.7 11.7 10.1 7.6 ONGC (ONGC) 200 200 Hold 171,111 21.4 14.0 14.1 9.3 14.2 14.1 3.6 4.5 5.0 10.5 8.7 6.6 9.8 6.6 6.7 Petronet LNG (PETLNG) 242 275 Buy 18,150 11.8 12.3 16.0 20.6 19.7 15.1 14.2 13.0 9.5 13.5 14.1 17.8 15.5 14.6 16.5 ICICI Securities Ltd Retail Equity Research Page 9

RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 10

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