Jefferies has provided its outlook on the oil and gas sector, emphasizing growth potential and attractive valuations in specific stocks. Here are the key takeaways:
Reliance Industries (RIL):
- Outlook: Restoration of mid-teens growth in the retail segment and a likely listing of Jio by FY26.
- O2C Segment: Improvement in Oil-to-Chemicals (O2C) profitability expected to drive earnings.
- Valuation: RIL’s valuation remains the cheapest since the Covid-19 period.
- Growth Projection: EBITDA growth of 14% projected for FY26E.
ONGC:
- Production Growth: Increased production levels are expected to enhance profitability.
- Pricing Reforms: Reforms in pricing structures to further improve financials by FY26.
- Valuation: ONGC is trading at attractive valuations, making it a preferred pick.
GAIL:
- Transmission Volume Growth: Healthy growth in gas transmission volumes expected.
- Tariff Hike Potential: A possible tariff increase could lead to a rerating of the stock.
- Preferred List: GAIL remains a top pick due to these growth drivers.
BPCL (Preferred among OMCs):
- Positioning: Among the Oil Marketing Companies (OMCs), BPCL stands out as Jefferies’ preferred pick, citing robust fundamentals and relative valuation appeal.
City Gas Distributors (CGDs):
- Stance: Jefferies remains underweight on CGDs, citing limited upside in the segment.
Jefferies sees significant growth opportunities in select oil and gas stocks, with RIL, ONGC, GAIL, and BPCL emerging as key picks for FY26. The brokerage highlights attractive valuations and growth potential in these companies while maintaining a cautious stance on city gas distributors.
Disclaimer: The above analysis is based on provided data and is for informational purposes only. It does not constitute financial advice. Readers should consult their financial advisors before making investment decisions.
