RIL, ONGC, Oil India, BPCL, HPCL, IOC, GAIL, IGL, MGL: PL revises share price targets ahead of Q3 results

Brokerage Prabhudas Lilladher (PL) in its Q3 preview note expects the operating profit for the oil & gas sector pack to decline 24 per cent sequentially to Rs 86,100 crore mainly on account of weak refining margins of oil marketing companies (OMCs). It has revised its target prices and ratings for a handful of shares ahead of the kick start of December quarter results.  

Upstream companies such as Oil & Natural Gas Corporation Ltd (ONGC) and Oil India Ltd, it said, are expected to maintain production volumes and net crude realisation of $75 per barrel post windfall tax. Similarly, it expects gas realisation to remain unchanged QoQ at $6.5 per mmBtu.

"Indraprastha Gas Ltd and Mahanagar Gas Ltd volumes are expected to grow 9 per cent YoY and 7 per cent YoY, while we build in a 31 per cent YoY volume growth in Gujarat Gas Ltd due to remarkable growth in industrial volumes. We expect Reliance Industries Ltd 's O2C segment to report lower operating profits with decline in refining margins and weak petchem spreads. We build in steady telecom performance as we build in 2 per cent QoQ ARPU growth; retail revenue growth is also expected to be steady. ONGC remains our top pick in the sector," PL said.

Also read: ONGC shares hit 52-week high as firm begins oil production in KG deep water block

Among OMCs, PL has maintained its ‘SELL’ rating on HPCL with a target of Rs 276 against Rs 272 earlier based on 0.7 times FY26 price to book value. It downgraded ratings on BPCL and IOC Ltd from 'Reduce' to ‘Sell’ valuing them at 1 time FY26 PBV and 0.7 times FY26 PBV, respectively.  PL sees BPCL at Rs 371 against Rs 365 earlier and IOC at Rs 94 (unchanged), respectively. It downgraded MRPL rating from ‘Hold’ to ‘Sell’ with target of Rs 106 based on 5 times FY25 EV/Ebitda.

For OMCs "Operating profitability to decline due to fall in refining margins: Average Singapore GRM for the quarter stood at $5.5 per barrel, down by $4.1 per barrel QoQ amid decline in product cracks. Inventory losses are expected to further impact GRMs. We thus expect OMCs’ results to be operationally weaker owing to significant decline in their refining margins. However, marketing margins on petrol and diesel have continued to remain strong amid fall in benchmark prices with a GMM of Rs9.1/1.2/ltr on petrol/diesel," PL said.

Among upstream companies, it expects Reliance Industries Ltd (RIL) results expected to be lower QoQ with weaker refining margins: It estimates refining throughput of 17.0mmtpa and sees a sequential fall in petchem profitability.

"Refining margins too are expected to decline due to fall in Singapore GRM.  We expect Jio to show steady performance, while retail segment profitability should be resilient. Maintain ‘Accumulate’ rating with SOTP-based target of Rs 2,718 against Rs 2,618 earlier, valuing standalone business at 7.5 times FY26 EV/Ebitda, Retail at 39 times FY26 EV/Ebitda and Jio at 15 times FY26 EV/Ebitda.

In the case of GAIL, PL said  GAIL’s trading and transmission performance is expected to remain strong, but petchem performance could remain under pressure.

"Transmission volumes are likely to reach 122 mmscmd, while trading volumes are estimated at 100 mmscmd. We anticipate petchem volumes at 178KT in Q3. It downgraded the rating for the stock to to ‘Hold’’ from ‘Buy’ but revised upward its target to Rs 155 against Rs 151 earlier, based on 12 times FY26 EPS of Rs10.9 adding value of investments of Rs 24.

PL downgraded its rating on Oil India to ‘Hold’ from ‘Buy’ rating with a revised target of Rs 379 from Rs 368, based on 5x FY26 EPS. It maintained ‘Buy’ rating on ONGC with target of Rs 258 from Rs 237 earlier based on 7 times FY26 EPS and adding the value of investments.

In the case of city gas distributors, PL said operating profitability may decline sequentially amid rising spot LNG prices. It expects a 31 per cent YoY volume growth in Gujarat on the back of recovery in Morbi volumes. MGL and IGL volumes, it said, are expected to grow 7 per cent and 9 per cent, respectively.

"We downgrade rating on MGL and Petronet from Hold to ‘Reduce’ with TP of Rs 1,065/Rs 208 (earlier Rs 1,065/208) based on 12 times FY26 EPS/10 times FY26 EPS respectively. We also downgrade Gujarat Gas from ‘Accumulate’ to ‘Hold’ with target of Rs 473 (earlier Rs 477) based on 24 times FY26EPS and GSPL from 'Buy' to ‘Accumulate’ with a TP of Rs374 (earlier Rs328) based on 7x FY26EPS adding the value of investments. We maintain ‘Hold’ rating on IGL with target of Rs 416 (earlier Rs 406) based on 13 times FY26 EPS," it said.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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