IOCL: Nirmal Bang upgrades stock, Elara sees 50% upside; why other brokers see OMC's shares falling

Domestic brokerage firms continue to remain divided on shares of Indian Oil Corporation (IOCL) after its quarterly earnings. Some analysts have upgraded the stock, citing up to 50 per cent upside potential, while others believe that the petrochem margins continue to weigh on the stock.

Indian Oil Corporation reported a 50 per cent year-on-year (YoY) rise in standalone net profit at Rs 7,265 crore in the March 2025 quarter on account of inventory gains and robust domestic sales. The oil major’s revenue from operations stood at Rs 2.18 lakh crore during the quarter, marginally lower on a YoY basis.

Indian Oil's gross refining margins (GRM) for Q4FY25 was $7.85 per barrel, while the refinery throughput of the company was 18.548 million metric tonne (MMT) during the quarter. Along with the Q4 results, IOC also announced a final dividend of Rs 3 per equity share for FY25.

After the 17.4 per cent decline in the stock YoY, which has priced in worries on weak GRMs, and LPG losses – likely to be compensated, as per IOC, said Nirmal Bang Institutional Equities, which has upgraded the stock to 'buy' from 'hold' post Q4. It has a target price of Rs 173 on the stock.

It has cited healthy marketing margins; potential revival in refining on likely closure in excess capacity, and eventual recovery in global demand for MS/HSD, higher product yield from 3 expansion projects expected to ramp up in FY27E; and the long-term growth from ramp up in standalone CGD across 26 areas – 6 of which are Ebitda positive, as key catalysts.

IOCL outperformed Nifty, in-line with lower crude prices, consequently resulting in healthy marketing margin and nil LPG under-recoveries, said Elara Capital. "We reiterate our positive view on oil marketing companies (OMCs) amid weak crude oil prices and expect the government to allow OMCs to earn above-historical integrated margin to fund their energy transition capex," it said.

The falling international crude oil prices bodes well for the OMCs’ gross margin for gasoline/diesel by Rs 3.5 per liter despite the recent Rs 2 per liter excise duty hike on gasoline/diesel. OMCs would also benefit from nil LPG losses in FY26E, it said. "We increase IOCL’s FY26E/FY27E EPS estimates by 48 per cent/44 per cent and raise our target by 26 per cent to Rs 214," Elara added.

Shares of Indian Oil Corporation jumped more than 4.4 per cent to Rs 149.70 on Monday, with a total market capitalization of more than Rs 2.10 lakh crore. The stock had settled at Rs 143.35 in the previous trading session on Friday. The stock has surged more than 35 per cent from its 52-week low at Rs 110.75 hit about 2 months ago.

IOCL’s Q4FY25 numbers were beat on estimates on the back of strong GRM and inventory gain, partly offset by LPG under-recovery and weak petchem segment. IOCL’s FY24 peak earnings deteriorated as highlighted in ‘Irrationality prompts downgrade’ as FY25 EBITDA/PAT fell 52 per cent/72 per cent YoY on account of GRM plunging 60 per cent YoY to $4.8 per bbl, said Nuvama Institutional Equities.

"Q4 Russian crude share at 14 per cent; further fall in share of Russian crude may hurt GRM with elevated FY26 capex guidance to weigh on RoCE and LPG under-recoveries with no clarity on government support," said Nuvama with a 'reduce' rating and a target price of Rs 123 on the stock. It sees 18 per cent correction in the stock.

HDFC Securities has a 'reduce' rating on IOCL with a target price of Rs 128 is premised on margin pressure due to increasing petchem supplies/capacity, lower refining margins, and moderation in auto fuel marketing margins. "IOCL’s Q4FY25 reported Ebitda at Rs 13,600 crore and adjusted PAT at Rs 7,300 crore QoQ) came in above our estimates due to higher-than-expected gross refining margins," it added.