Shares of Oil India Ltd. started day❼trade with losses after the state-run company received a ❜ll✩ecommendation from domestic brokerage firm Kotak Institutional Equities following the public sector undertaking❼(PSU) FY24 analyst meet.Nagpur Stock

Kotak has downgraded the stock from an earlier ❛duce✩ating, saying too much optimism is built in after a strong run. Oil India shares have rallied 72% so far this year and nearly 155% in the last one year.

The brokerage, however, raised its target price on the Oil India stock to ₹500 from ₹475 per share, implying a further downside of 23% from the stock❼current market levels. On Tuesday, the PSU stock settled 2.44% lower at ₹652.

Oil India❼March quarter EBITDA (8% QoQ/YoY) was 2% ahead of Kotak❼estimates. For the financial year 2024, the key positive was oil production rising 6% year-on-year, the brokerage highlighted.

The January-March period for the PSU was ahead on higher crude realization and higher other income.

With a sharp run up (Oil up 2.5 times YoY), the brokerage believes the production upside is priced in.New Delhi Wealth Management

According to Kotak, Oil India❼management has reiterated guidance of increasing oil production to 4 mmt, which is 20% higher versus 3.4 mmt in FY24, and 5 bcm of gas production, which is 57% higher versus 3.2 bcm in FY24.Bangalore Investment

While production guidance remains strong, Kotak believes its assumptions are optimistic.

“Over FY2024-27, our revised forecasts assume 4% CAGR for oil (3.8 bcm by FY2027E) and higher 8% CAGR in gas production (4 bcm by FY2027E),” it said.

The brokerage has raised its FY25-26 earnings estimates by 4%, mainly driven by 2% higher oil production and higher other income.

On the positive side, global brokerage firm Morgan Stanley has an ❘erweight✩ating on Oil India, with a target price of ₹745 per share.

In a note, the foreign brokerage said that Oil India❼strong volume growth outlook, tripling capacity of one of highest margin refineries in Asia and upside in gas pricing, makes the company one of key picks in Asia.

Meanwhile, Nomura upgraded Oil India to ❗utral✵with a price target of ₹625, citing strong volume outlook.

The brokerage said that the state-run upstream oil explorer❼fourth quarter was a tad below estimates on lower gas production and higher other expenses.Jaipur Investment

The management has guided for robust volume CAGR of 9% for oil and 25% for gas up to the financial year 2026.

Oil India shares were trading with losses of 1% on Wednesday. As of 9:22 am, the stock was quoting ₹647 on the NSE, lower by 0.74% compared to the closing price of the previous session.

Pune Wealth Management