State-run explorer Oil India Ltd. (OIL) reported a fall in standalone net profit and income for the second quarter (Q2) ended September 2016. Though the company's board approved a 1:3 bonus issue on Monday, the share price continues its downhill journey, trading with losses of 2.90 percent at Rs 415.40 on the Bombay Stock Exchange (BSE) at around 3 pm.
Net profit for Q2 dropped about 17.8 percent on year-on-year basis to Rs 580.3 crore from Rs 705 crore, while total income declined to Rs 2,721 crore.
Operating profit fell 9 percent to Rs 836 crore due to lower oil and gas realisations, said HDFC Securities in a note on Tuesday.
"Crude prices were stable at ~$44/bbl in 1HFY17. OIL's profits remain largely unaffected if crude price is above $47/bbl. However, at lower crude prices, negatives from lower net realisation outnumber the benefits from reduction in oil under-recovery," the brokerage said.
The trends for the company's margins are mixed, given the dynamics playing out in the global crude market. "Crude prices are likely to remain range-bond. Strong Shale oil supplies and a rise in output in Iran will act negatively. However, supply cut by Russia and OPEC countries will check the downside," HDFC Securities said.
Sudeep Anand, analyst at IDBI Capital Markets & Securities, said net oil realization dipped to $44.6/bbl in Q2FY17 from $46.4/bbl in Q2FY16.
OPEC members are scheduled to meet in Vienna on Wednesday (November 30) to discuss output cut to stem the fall in prices.
Outlook for OIL
"OIL's stock performance will move in tandem with the crude prices. We do not expect sharp fall in crude prices considering the talks between OPEC and Russian oil producers."
IDBI Capital Markets & Securities has put the target price for the stock as Rs 428 while HDFC Securities has pegged the target price at Rs 470.