PL updates its share price targets ahead of the Q3 results for RIL, ONGC, Oil India, BPCL, HPCL, IOC, GAIL, IGL, and MGL: PL has upheld its ‘SELL’ recommendation for HPCL, now setting a revised target of Rs 276 compared to the previous Rs 272. In a shift of ratings, it has downgraded BPCL and IOC Ltd from ‘Reduce’ to ‘Sell,’ evaluating them at 1 time FY26 PBV and 0.7 times FY26 PBV, respectively.
In its Q3 preview, brokerage firm Prabhudas Lilladher (PL) anticipates a 24% sequential decline in the operating profit of the oil & gas sector, estimating it to be Rs 86,100 crore.
This decline is primarily attributed to the weakened refining margins of oil marketing companies (OMCs). PL has proactively adjusted target prices and ratings for a select group of shares in preparation for the commencement of the December quarter results.
Upstream entities such as ONGC (Oil & Natural Gas Corporation Ltd) and Oil India Ltd are foreseen to sustain production volumes, accompanied by a net crude realization of $75 per barrel following the imposition of the windfall tax. The projection also indicates an unaltered gas realization at $6.5 per mmBtu quarter-over-quarter.
Anticipating a 9% year-over-year growth in volumes for Indraprastha Gas Ltd and Mahanagar Gas Ltd, and an impressive 31% year-over-year increase in volumes for Gujarat Gas Ltd, the latter attributed to substantial growth in industrial volumes.
For Reliance Industries Ltd’s O2C segment, a dip in operating profits is expected due to diminishing refining margins and weakened petchem spreads.
The telecom segment is predicted to maintain a stable performance, factoring in a 2% quarter-over-quarter ARPU growth, while retail revenue growth is anticipated to remain consistent. PL concludes by affirming ONGC as its preferred choice within the sector.
PL maintains a ‘SELL’ rating for HPCL within the OMCs, setting a target of Rs 276 (up from Rs 272) based on 0.7 times FY26 price-to-book value. Notably, BPCL and IOC Ltd face downgrades from ‘Reduce’ to ‘Sell,’ valued at 1 time FY26 PBV and 0.7 times FY26 PBV, respectively.
PL’s assessments project BPCL at Rs 371 (up from Rs 365) and IOC at Rs 94. MRPL sees a downgrade from ‘Hold’ to ‘Sell’ with a target of Rs 106, grounded on 5 times FY25 EV/Ebitda.
Analyzing the OMCs’ landscape, PL predicts a decline in operating profitability due to falling refining margins. The average Singapore GRM for the quarter registers at $5.5 per barrel, reflecting a QoQ decrease of $4.1 per barrel amidst declining product cracks.
Inventory losses are poised to further impact GRMs, indicating a potential operational weakness in OMCs’ results. Despite this, robust marketing margins on petrol and diesel persist, maintaining strength even amid benchmark price decreases, with a GMM of Rs 9.1/ltr and 1.2/ltr on petrol and diesel, respectively, as noted by PL.
PL anticipates a decline in Reliance Industries Ltd’s (RIL) QoQ results, attributed to weaker refining margins and an estimated refining throughput of 17.0mmtpa.
A sequential decrease in petchem profitability is also expected. Despite these challenges, PL foresees steady performance from Jio and resilient profitability in the retail segment.
The ‘Accumulate’ rating is maintained, with a target of Rs 2,718 (up from Rs 2,618), based on a SOTP valuation—7.5 times FY26 EV/Ebitda for standalone business, 39 times FY26 EV/Ebitda for Retail, and 15 times FY26 EV/Ebitda for Jio.
Regarding GAIL, PL envisions robust trading and transmission performance but notes potential pressure on petchem performance.
Anticipating transmission volumes at 122 mmscmd, trading volumes at 100 mmscmd, and petchem volumes at 178KT in Q3, the stock rating is downgraded to ‘Hold’ from ‘Buy,’ with an upwardly revised target of Rs 155 (previously Rs 151), based on 12 times FY26 EPS of Rs 10.9, adding the value of investments of Rs 24.
For Oil India, PL downgrades the rating to ‘Hold’ from ‘Buy’ with a revised target of Rs 379 (up from Rs 368), based on 5x FY26 EPS. Conversely, ONGC maintains a ‘Buy’ rating with a target of Rs 258 (up from Rs 237), based on 7 times FY26 EPS, incorporating the value of investments.
For city gas distributors, PL suggests a potential decline in operating profitability due to the sequential increase in spot LNG prices. The forecast includes a projected 31% YoY volume growth in Gujarat, driven by the recovery in Morbi volumes. MGL and IGL volumes are expected to grow by 7% and 9%, respectively.
In terms of ratings, PL downgrades MGL and Petronet from ‘Hold’ to ‘Reduce’ with target prices of Rs 1,065 and Rs 208 (unchanged from earlier Rs 1,065/208), based on 12 times FY26 EPS and 10 times FY26 EPS, respectively.
Additionally, Gujarat Gas sees a downgrade from ‘Accumulate’ to ‘Hold’ with a target of Rs 473 (previously Rs 477), based on 24 times FY26 EPS. GSPL is downgraded from ‘Buy’ to ‘Accumulate,’ with a target price of Rs 374 (previously Rs 328), grounded on 7x FY26 EPS, adding the value of investments.
Meanwhile, IGL maintains a ‘Hold’ rating with a target of Rs 416 (previously Rs 406), based on 13 times FY26 EPS.
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