Up to 150% jump YTD! Analysts suggest buying these stocks from oil and gas sector

A standout performance by select oil and gas companies, including oil retailers, has helped the BSE Oil & Gas index surge nearly 38% up to September 6 this calendar year. In contrast, the benchmark BSE Sensex has gained 12.4% year-to-date.

With a surge of 152% YTD, Oil India emerged as the top gainer in the index. Shares of the company soared to Rs 627.10 on September 6 from Rs 248.23 on December 29, 2023. Of late, the company reported 32.2% year-on-year growth in consolidated net profit at Rs 188.78 crore for the quarter ended June 30. Gross sales increased by 45.90% YoY to Rs 9350.89 crore during the quarter under review.

Motilal Oswal Financial Services has a ‘Buy’ call on Oil India with a target price of Rs 740. “Oil India remains a strong conviction at 1.9x FY26E P/B (standalone) valuation. It is a unique play to benefit from the strong multi-year uptrend in both upstream and refining,” the brokerage said in a report.

Oil marketing company Hindustan Petroleum Corporation (HPCL) stood next in the list. The scrip advanced 63% to Rs 434.35 during the same period. HPCL posted nearly 91% dip in consolidated net profit at Rs 633.94 crore in Q1FY25.

Brokerage Emkay Global Financial Services retained positive view on oil marketing companies despite steep fall in net profit in the June quarter. It believes that softer crude oil price provides a comfortable position to OMCs.

“Q2FY25-TD earnings run-rate of OMCs indicates sequential recovery backed by better marketing margins,” Emkay Global Financial Services said in a report. The Brent crude was hovering at around $72 per barrel in the international markets on September 9. Emkay has a ‘Buy’ call on BPCL (target price: Rs 405) and HPCL (target price: Rs 475) and an ‘Add’ rating on IOCL (target price: Rs 205).

Petronet LNG (up 59%), Bharat Petroleum Corporation (up 57%) and Oil & Natural Gas Corporation (up 51%) stood among other major gainers which outpaced the BSE Oil & Gas in 2024. Oil retailer BPCL also posted a 73.30% YoY dip in consolidated net profit at Rs 2,841.55 crore for the quarter ended June 2024.

According to YES Securities, India’s growth outlook remains healthy with strong support from lower crude prices.

“We expect a range of $72-78 per barrel for the next few months. The global crude supply is still stronger, with OPEC supply increasing while demand is expected to fall on key economy’s slowdown as per key global agencies. Gross refining margins (GRMs) and gross marketing margins are currently above normal and would result in better profits and support the balance sheet of Indian refiners and OMCs – leading to a positive stance on the sector,” YES Securities said.

Gail (India), Indian Oil Corporation, Indraprastha Gas and Reliance Industries also gained 38%, 36%, 30% and 13%, respectively, YTD. However, Adani Total Gas stood as the sole loser in the index with a fall of 16%. The bottom line of GAIL increased 78% YoY to Rs 3182.93 crore in Q1FY25. On the other hand, IOC witnessed a fall of nearly 76% YoY to Rs 3528.49 crore during the quarter under review.

Brokerage YES Securities prefers oil-related stocks over the gas. It is positive on HPCL (target price: Rs 500), Oil India (TP 855), BPCL (TP 440), ONGC (TP 391) and CPCL (TP 1,450).