CLSA raises target price on Indian Oil Corp by 20%

MUMBAI: CLSA has retained its buy rating on Indian Oil Corporation and raised target price by 20% to Rs 810 from Rs 675. The brokerage said that the company's annual report shows that while return ratios rose to six-year high in the financial year ended March, operating cash flow and free cash flow fell due to lesser savings in working capital compared to the previous financial year. The company also lost market share in diesel and aviation turbine fuel.

However, the ramp-up of refinery in Paradip, high petchem profitability and elimination of inventory losses will help the company's free cash flow to stay positive, said CLSA.

The Paradip ramp-up should reduce the gap in marketing and refining volume by 10ppt even after marketing growth, it noted in a report dated Monday.

“High share of petchem and more stable pipeline business in FY18CL Ebitda and more attractive valuations are supportive factors for IOCL when compared with peers,” said CLSA, adding that Indian Oil Corporation is its preferred pick among oil marketing firms.