Paradip refinery to drive better profitability
Indian Oil Corporation Ltd. (IOCL) has a strong presence in refining, marketing, pipelines networks and petrochemicals. It is the largest oil marketing company in India with a ~43% market share. Further, it has the largest network of retail outlets across the country (more than 26,000 outlets). IOCL also has minor interest in the upstream segment.
Valuation: Within state oil marketing companies (OMCs), IOCL is our top pick given its diversified business model, further ramp-up of Paradeep refinery and potential upside in marketing segment. Moreover, IOCL also offers an attractive dividend yield of ~4.6%. Hence, we continue to maintain BUY rating to the stock with a target price (TP) of Rs. 468 using sum of the part (SOTP) valuation methodology wherein we value its standalone business at Rs. 427 (P/E of 10.0x for FY19E) and investments at Rs. 41.
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