Why IOC Share Price is Falling

The recent drop in Indian Oil Corporation's (IOC) share price has left investors concerned.

IOC, one of India's leading energy companies, plays a huge role in refining and distributing oil across the country.

Its stock price has been sliding, prompting questions about what might be happening behind the scenes.

For investors, the situation is unsettling, as IOC is typically seen as a stable player in the oil and gas industry.

This decline in IOC's stock price comes at a time of global uncertainty. Rising tensions in international markets are affecting oil prices, and this volatility has made the energy sector more sensitive than usual.

So, what's causing a fall in the stock price?

Let's find out...

Stock Plunges on Bearish Outlook

Shares of oil marketing companies such as Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL) fell this week on account of weak marketing and refining performance for the September 2024 quarter.

The EBITDA (earnings before interest, depreciation and amortization) for these companies for the September 2024 quarter was weaker than anticipated.

For Indian Oil in particular, earnings miss was driven by weaker-than-expected earnings across the refining, marketing and petrochemical segments.

Many brokerages downgraded the ratings for the stock as well.

The company reported a 99% YoY drop in net profit to Rs 1.8 bn from Rs 129.7 bn in the year ago quarter on account of inventory losses and weak refining margins.

IOC cited narrower marketing margins, weaker refining margins from lower crack spreads, and declining international crude prices as key factors impacting profit.

While refinery margins fell, the company also booked under-recoveries on selling domestic cooking gas LPG at government-controlled cost, which was lower than the cost.

Revenue from operations for the quarter fell 3.5% to Rs 1.95 tn from Rs 2 tn in the year-ago period.

The nation's top refiner and fossil fuel retailer also reported an operating loss of Rs 9.9 bn during the quarter compared to a profit of Rs 171 bn a year earlier.

Exceptional income of Rs 11.6 bn helped it report a net profit during the quarter.Bharat Petroleum and Hindustan Petroleum, two other state-run oil marketing companies, too have reported a sharp drop in quarterly profits as oil prices turned volatile and a global fuel supply glut crushed refining margins.

Historical Financial Track Record is Strong

The company's leadership in its field is well-reflected in its incredible performance between 2020-24.

Coming to financials, the company's sales and net profit have grown at a 5-year CAGR of 8% and 20%, respectively. The returns have been strong, with the RoE and RoCE averaging over 12.5% and 15%, respectively.

(Rs m, Consolidated)	FY20	FY21	FY22	FY23	FY24
Revenue	3,991,319	2,213,757	4,419,261	7,321,019	6,714,683
Revenue Growth (%)	(-9.6)	(-44.5)	99.6	65.7	(-8.3)
Net Profit	(-18,763)	217,622	257,266	117,043	431,612
Net Profit Margin (%)	(-0.5)	9.8	5.8	1.6	6.4
Return on Equity (%)	(-2.0)	19.5	19.3	8.4	23.5
Return on Capital Employed (%)	(-0.4)	21.1	21	11.1	28.3

Source: Equitymaster

Currently, the Indian Oil Group holds approximately 31% of India's national refining capacity.

IOC's infrastructure is vast, with nine refineries that convert crude oil into essential fuels like petrol and diesel, a 20,000-kilometer pipeline network for fuel transport, 99 LPG bottling plants, 129 aviation fuel stations, and over 61,000 customer touchpoints, such as petrol stations and LPG agencies.

This expansive setup is supported by IOC's expertise in various refining processes and cutting-edge refining technology, making it a robust player in the oil sector.

Notably, it has also commissioned several grassroots refineries and modern process units.

Renewable Energy Pivot to Drive Future Growth

With India's oil demand forecasted to rise from 5.4 m barrels per day in 2023 to 8.3 m bpd by 2050, IOC is targeting significant growth.

To meet this demand, the corporation aims to expand its refining capacity while scaling conventional and non-conventional energy solutions.

In fact, IOC is set on meeting one-eighth of India's energy needs by 2050, positioning itself as a pillar of India's future energy landscape.

Alongside refining, IOC is strategically pivoting toward clean and renewable energy.

It has launched a new subsidiary focused on low-carbon initiatives to achieve net-zero emissions by 2046.

By 2050, IOC plans to generate 200 GW of renewable energy and produce 7 million tonnes of biofuels and 9 million tonnes of biogas.

A notable objective includes converting 50% of its hydrogen production to green hydrogen by 2030. With this, IOC continues to pioneer the green energy transition.

IOC is also expanding its petrochemical capacity, which is expected to more than triple by 2030, with new plants being developed at Gujarat and Panipat refineries and enhanced lube oil base stock (LOBS) capacity at its Haldia complex.

The company has outlined a transformative growth strategy combining traditional oil refining with clean energy investments in green hydrogen and EV charging, aiming to become a US$ 1 trillion entity by 2047.

How IOC Share Price has Performed Recently

In the past month, shares of the company have fallen 14%.

However, the stock is up 7.5% in 2024 and 41% in the year gone by.

The stock touched its 52-week high of Rs 196.8 on 8 Feb 2024 and a 52-week low of Rs 96.36 on 6 November 2023.

At the current price, the company trades at a price to earnings multiple of 12.6x.

About IOC

IOC is a Maharatna company controlled by the government of India.

It has business interests straddling the entire hydrocarbon value chain - from refining, pipeline transportation and marketing of petroleum products to R&D, exploration & production, marketing of natural gas and petrochemicals.

It has a network of fuel station, bulk storage terminals, inland depots, aviation fuel stations, LPG bottling plants, and lube blending plants.

It also has set up approximately 257 electric vehicle (EV) charging station and 29 battery swapping stations at its energy pumps across the country.

For more details about the company, you can have a look at Indian oil Corporation's financial factsheet and latest quarterly result.

You can also compare Indian Oil Corporation with its peers.

IOC vs BPCL

IOC vs HPCL

IOC vs MRPL

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...