Brokerage firm Antique Stock Broking is bullish on all three state-run downstream oil refiners, Hindustan Petroleum Corporation Ltd. (HPCL), Bharat Petroleum Corporation Ltd. (BPCL) and Indian Oil Corporation (IOC) Ltd. as it believes that these oil marketing companies are in a “sweet spot.”
The brokerage said that the autofuel marketing margins at ₹9.8 per litre is at a high and Singapore complex refining margins too have bounced back, averaging around $5 per barrel currently compared to $3.6 in the September quarter, Antique said.
These autofuel marketing margins are likely to remain at elevated levels for financial year 2026 as well as 2027, as crude oil prices are likely to remain rangebound due to the global surplus.
“While the market is concerned about the possibility of the LPG burden, we believe it is not a serious concern, given the large marketing margin cushion, which can offset the LPG burden,” Antique wrote in its note, although it expects the government to compensate.
Antique believes that between 4.2 times to 5.1 times Enterprise Value to EBITDA, valuations of all three OMCs continue to remain attractive, with dividend yield ranging between 4.3% to 6.4%.
The brokerage has a “buy” recommendation on all three OMCs. It has a price target of ₹405 on BPCL, it has raised its price target on HPCL by 6% to ₹558, while its price target on Indian Oil remains at ₹246.
While HPCL and BPCL’s shares have potential upsides ranging between 33% and 37% from current levels, while Indian Oil’s shares have a potential upside of 72% from current levels.
Shares of HPCL are trading 1.4% higher at ₹410, while those of BPCL are trading 1.6% higher at ₹308.45. Shares of Indian Oil are currently little changed at ₹143.5.
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