Lower crude oil prices continue to drive upgrades for HPCL, IOC: Check latest price targets

Benign valuations, lower crude prices, and stronger Gross Refining Margins (GRMs) will fuel a rally in state-run oil marketing companies (OMCs), with stocks having the potential to rise by as much as 50%.

Brokerage firm Avendus Spark has upgraded Indian Oil Corporation (IOC) Ltd., the country's largest state-run downstream oil refiner to 'Buy' rating. The brokerage has a price target of ₹155 on Indian Oil. The price target implies a potential upside of 24% from Tuesday's closing level.

Shares of Indian Oil are still down 32% from their recent peak of ₹185.97.

Avendus Spark has also upgraded HPCL to 'Buy'. The brokerage has a price target of ₹460 on HPCL. The price target implies a potential upside of 39% from Tuesday's closing level.

HPCL shares have corrected 28% from their recent peak of ₹457.15.

The brokerage has also maintained a 'Buy' rating on BPCL, with a price target of Rs 400 per share. The price target implies a potential upside of 51% from Tuesday's closing level.

Meanwhile, BPCL shares have corrected 29% from their recent peak of ₹376.

Key reasons behind the bullish outlook

- Benign valuation: The stock is trading at a 15-25% discount, compared to its 10-year average price-to-book (P/B) ratio.

- Lower crude price: Oil prices are expected to stay below $75 per barrel, reducing input costs.

- Stronger GRMs: Higher refining margins will support profitability.

Outlook

Avendus Spark wrote in its note that a slowdown in refinery additions in the Calendar Year 2025-2026 points to a revival in GRMs.

The brokerage also said that an expansion in auto fuel marketing margins and reduced LPG losses are expected to play a key role in FY26.

The brokerage also expects that over 70% of FY26 profit estimates could be achieved in the first half of FY26 alone.

Note To Readers

Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.