Indian Oil Corporation (IOC) Q3FY21 result was a beat to our estimates owing to robust performance from marketing and petrochemicals business, said IDBI Capital in its report.

The company also reported inventory gains of Rs 26.3 billion (Rs 9.2 billion for refinery and Rs 17.1 billion for marketing). While core GRM came slightly below expectation at USD 1/bbl (IDBIest USD 1.5/bbl), marketing EBITDA/mt increased 33% and petrochem EBITDA/mt doubled YoY to USD 335.

Volume across segment rebounded to pre-covid levels where ATF is yet to catch up while Petrochem volume grew 25% YoY.

IDBI Capital expects strong show from marketing would remain there in FY22 after a small hic-up in Q4 on the back of bearish view on crude oil price. "Also, buoyant petrochem margin and revival in refining margin from second half along with modest growth in auto fuel demand are few triggers for the growth in FY22/FY23.

Further, lower interest cost owing to declining debt level would further support PAT. We upgrade the stock to Buy with a revised SOTP based target price of Rs 113 (Rs 100 based on EV/EBITDA and Rs 13 for its investments).

Factoring higher marketing margin and up cycle in petrochem, we raise FY22E/FY23E EBITDA estimates by 11%/9%. We raise our TP to Rs 113 from Rs 87 earlier and upgrade the stock to Buy from Accumulate."

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