Buy RIL shares, switch from ONGC, BPCL, HPCL, IOC, IGL and MGL, says Nuvama

Nuvama Institutional Equities has recommended investors to switch to Reliance Industries Ltd (RIL) and Petronet LNG Ltd  from stocks of oil marketing companies namely BPCL, HPCL and IOC, and also from city gas distributors (CGDs) such as Mahanagar Gas Ltd (MGL), Indraprastha Gas (IGL) and Gujarat Gas Ltd.    

OMCs face a weak June quarter on negative fuel retail margins and high LPG under-recoveries, Nuvama said. The domestic brokerage said volume outlook is strong from CGDs, but gas cost spike may weigh on margins. Nuvama brokerage likes RIL as the New Energy rollout is progressing well with BESS, ingot/wafer and polysilicon facilities likely to be functional by end FY27. This is even as RIL's oil-to-chemicals (O2C) segment is seen suffering on supply disruptions and adverse regulations due to the West-Asia conflict. 

Nuvama suggested 'Buy' on RIL ad Petronet LNG, with targets of Rs 1,765 and Rs 335, respectively. It suggested 'Reduce' on BPCL and HPCL and 'Hold' on IOC, with targets of Rs 277, Rs 372 and Rs 148, respectively. Targets for GAIL and IGL are set at Rs 148 each. Nuvama sees Gujarat Energy (Gujarat Gas) at Rs 435 and MGL at Rs 1,084.   

"OMCs expect a weak Q1 given negative marketing margins (petrol/diesel at Rs 13/34 per litre) and expanding LPG under-recoveries per cylinder (Rs 170/670 in Apr/May-26 versus Rs 85–100 in Q4). GAIL has cut its FY27 transmission guidance by 13–17 per cent (implying 3–6 per cent YoY fall) while petchem profitability stays uncertain. PLNG Dahej utilisation currently at 53 per cent post declaration of force majeure on 7.5mtpa QE LNG contract," Nuvama said,

ONGC, it said, has refrained from providing an annual production guidance, but expects a 24 oer cent rise in output from Western Offshore post-evaluation from BP. "Production from its $5 billion flagship KG-98/2 block has stalled on geologic issues," Nuvama said. 

CGDs, Nuvama said, expects healthy volume growth to continue driven by CNG (IGL, MGL), D-PNG and industrial PNG (GEL) while managing input gas cost inflation via measured price hikes.

In the case of RIL, Nuvama said the management highlighted continued progress across upstream solar manufacturing, including polysilicon, ingot/wafer and glass facilities.

"BESS, ingot/wafer and polysilicon facilities are likely to be functional by end-FY27. Polysilicon production is likely to commence at a minimum viable scale of 10GW.  The company is targeting a progressive ramp-up to 20GW annual fully integrated solar PV manufacturing capacity across the value chain over next few quartersm" Nuvama said.

 RIL's m,anagement indicated that HJT technology is now well established and meeting performance benchmarks. Notably, HJT costs are stated to be below TOPCon back-contact technology while maintaining similar efficiency levels, Nuvama said.