PL updates share price targets: Prabhudas Lilladher (PL) has reassessed its outlook on several energy sector stocks in anticipation of the Q3 results. The brokerage firm has upheld its 'SELL' rating for HPCL but adjusted the target to Rs 276 from the previous Rs 272. Additionally, PL has downgraded the ratings of BPCL and IOC Ltd from 'Reduce' to 'Sell,' valuing them at 1 time FY26 PBV and 0.7 times FY26 PBV, respectively.
According to PL's Q3 preview note, the oil & gas sector is likely to witness a 24% sequential decline in operating profit to Rs 86,100 crore, primarily due to weakened refining margins among oil marketing companies (OMCs). The firm has revised target prices and ratings for selected stocks in light of this ahead of the December quarter results.
Upstream companies such as ONGC and Oil India are expected to maintain production volumes and a net crude realization of $75 per barrel post-windfall tax. PL also predicts steady gas realization at $6.5 per mmBtu. The brokerage anticipates volume growth for Indraprastha Gas Ltd (IGL) and Mahanagar Gas Ltd (MGL) at 9% YoY and 7% YoY, respectively. Gujarat Gas Ltd is expected to experience a significant 31% YoY volume growth due to increased industrial volumes. Despite an expected decline in refining margins and weak petchem spreads, PL foresees Reliance Industries Ltd's (RIL) telecom segment performance to be steady.
PL maintains a 'SELL' rating for HPCL, with a target of Rs 276, and has downgraded BPCL and IOC Ltd from 'Reduce' to 'Sell,' valuing them at 1 time FY26 PBV and 0.7 times FY26 PBV, respectively. The brokerage sees BPCL at Rs 371 (previously Rs 365) and IOC at Rs 94 (unchanged). MRPL's rating has been downgraded from 'Hold' to 'Sell' with a target of Rs 106 based on 5 times FY25 EV/Ebitda.
Concerning OMCs, PL expects operating profitability to decline due to falling refining margins, with average Singapore GRM for the quarter dropping to $5.5 per barrel. Despite the decline, marketing margins on petrol and diesel are expected to remain strong.
For RIL, PL anticipates lower QoQ results with weaker refining margins. The brokerage maintains an 'Accumulate' rating with a revised target of Rs 2,718 (previously Rs 2,618), based on SOTP valuation.
In the case of GAIL, PL notes that trading and transmission performance are expected to remain robust, but petchem performance may face pressure. The rating for GAIL has been downgraded to 'Hold' from 'Buy' with an upwardly revised target of Rs 155 (previously Rs 151).
PL has downgraded Oil India to 'Hold' from 'Buy' with a revised target of Rs 379 (previously Rs 368) and maintained a 'Buy' rating for ONGC with a target of Rs 258 (previously Rs 237).
Regarding city gas distributors, PL predicts a sequential decline in operating profitability due to rising spot LNG prices. It foresees a 31% YoY volume growth in Gujarat and expects MGL and IGL volumes to grow by 7% and 9%, respectively.
PL downgrades ratings on MGL and Petronet from 'Hold' to 'Reduce,' while Gujarat Gas is downgraded from 'Accumulate' to 'Hold.' IGL's rating is maintained at 'Hold' with a target of Rs 416 (previously Rs 406).
Important: The provided information is for informational purposes only and is not to be construed as investment advice. Readers are advised to consult with a qualified financial advisor before making any investment decisions.
