Motilal Oswal's report on Indian Oil Corporation (IOCL)Ongoing sector reforms reduced IOCL’s debt and we expect marketing margins to improve over the next 12-18 months owing to pricing freedom.We believe IOCL’s large asset base in refining and marketing is non-replicable and its well-diversified earnings provide stability to earnings.While refining margins would be governed by global demand-supply; likely higher marketing margins provide predictability to its earnings and should lead to re-rating, in our view.The stock trades at 7.2x FY17E EPS of INR55. Our SOTP-based fair value stands at INR570, implying 44% upside. Valuations attractive with 4% dividend yield. Buy.Valuation and viewKey risks include crude price (inventory losses) and INR/USD volatility and any delay in the commissioning of Paradip refinery."We value IOCL at 5.5x for refining/petchem and 8x for marketing to arrive at a fair value of INR570, implying a 44% upside. The stock trades at 7.2x (lowest among the three OMCs) FY17E EPS of INR55 and 1.1x FY17E BV. Buy the stock for target price of Rs 570", says Motilal Oswal research report.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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