"FAIR VALUE" "POL" OF RS. 399

"FAIR VALUE" "POL" OF RS. 399

Current Price: Rs.284.29

The main earning drivers for POL are the rising international oil prices which have helped in offsetting the decline in productionfrom major oil field, Pindori. The production outlook of the company is stable in the short to medium term due tocontinued problems at Pindori, however production from Tal block and Adhi field is likely to augment in the coming yearsdue to development plans and significant reserves of these two field which may help the production outlook for the long term toimprove to a positive stance. Other income will be an important revenue driver and is likely to contribute Rs1.3b in FY’09 dueto increased financial assets income & dividend income from associates and subsidiaries. POL holds 25.0% stake in NRL &7.0% stake in APL. Also the company is likely to book capital gain of Rs1.79b in its investment in APL having an impact ofRs9.06/share. Forward PER for FY09 is on the lower side at 7.30x. At the current price of Rs284.29, the stock is trading at TSR of35.7% (including dividend yield of 7.0%) from our target price of Rs399/share.