Antique Stock Broking has reiterated its ‘Buy’ recommendation on Hindustan Petroleum Corporation Ltd. (HPCL), Bharat Petroleum Corporation Ltd. (BPCL), and Indian Oil Corporation Ltd. (IOC), citing improving refining margins, lower crude oil prices, and potential demand recovery. The brokerage has revised its target prices, raising them slightly:
- HPCL: ₹565 (from ₹555)
- BPCL: ₹425 (from ₹420)
- IOC: ₹172 (from ₹170)
Key takeaways
- Oil marketing companies (OMCs) have declined 10-20% year-to-date, mainly due to non-compensation of LPG under-recoveries.
- Crude oil prices have dropped by $5 per barrel, boosting auto-fuel margins.
- Singapore gross refining margins (GRMs) improved to $4.3 per barrel from $3.3 per barrel in Q4, with further upside expected.
- GRMs are projected in the range of $5-6 per barrel, supported by:
- Permanent refinery shutdowns
- Improved light-heavy crude differentials as OPEC+ unwinds production cuts
- Potential demand recovery from China
Outlook and crude oil forecast
Antique has lowered its crude oil estimate for FY26 to $70 per barrel (from $75), citing:
- OPEC+ unwinding voluntary supply cuts (2.2 mbpd from April 2025)
- Strong non-OPEC+ supply
- A potential Russia-Ukraine peace deal, which could stabilize the market
With crude at $70 per barrel, LPG losses are projected to decline 35% to ₹285 billion in FY26, reducing subsidy burden risks.
Impact on OMCs
- EBITDA estimates for FY25 have been cut by 1-8%, but the brokerage has raised FY26 and FY27 estimates by 1%.
- Falling LPG under-recoveries and strong auto-fuel margins are expected to support profitability.
- Valuations remain attractive, providing a buying opportunity for investors.
Antique remains constructive on OMCs, expecting better margins and profitability in the coming quarters.
(Disclaimer: This article is for informational purposes only and does not constitute financial advice.)