Chennai Petroleum shares surge 7% post Q2 results; YES Securities sees further 34% upside

Shares of Chennai Petroleum Corporation Ltd (CPCL) surged 7.07 per cent in Tuesday's trade to touch a high of Rs 823.90 after the company reported robust earnings for the July–September quarter (Q2 FY26).

YES Securities reaffirmed its 'Buy' rating on CPCL, with an unchanged target price of Rs 1,100, indicating a potential upside of 33.51 per cent from the day's high.

According to the brokerage, CPCL delivered a stronger-than-expected performance, driven by higher gross refining margins (GRMs) and inventory gains. The company reported an EBITDA of Rs 1,150 crore and a PAT (profit after tax) of Rs 730 crore, compared with Rs 98.6 crore and a loss of Rs 56.6 crore, respectively, in the previous quarter. In the same period last year, CPCL had posted a loss of Rs 670 crore in EBITDA and Rs 630 crore in PAT.

YES Securities noted that CPCL's reported GRM for the quarter stood at $9.1 per barrel, up from $3.22 in the previous quarter and a negative $1.6 in Q2 FY25. It estimated that inventory gains contributed about $1 per barrel, implying a core GRM of around $8.1 per barrel, significantly higher than the Singapore benchmark GRM of $4 per barrel.

The brokerage added that refinery throughput came in at 3.013 million metric tonnes (MMT), reflecting 114 per cent utilisation, up from 113 per cent in the previous quarter and 79 per cent a year ago. Despite a 25-day phased shutdown in late September and early October, operations have now normalised, with no major impact expected in the ongoing quarter.

On the balance sheet front, CPCL's debt decreased sequentially by Rs 2,060 crore to Rs 1,880 crore, marking a Rs 4,180 crore year-on-year (YoY) reduction. Capex for the quarter stood at Rs 96 crore, with a FY26 target of Rs 700 crore.

YES Securities, based on its FY27 estimates, has valued CPCL at Rs 1,100 per share by assigning a 1.6x price-to-book multiple. The brokerage reiterated its 'Buy' rating on the stock with a one-year investment horizon.