PSU Stocks To Buy: Elara projects 38% upside for this state-run refiner

The stock price of Indian Oil Corporation Ltd. (IOC) has rallied 18% over the past six months, outperforming the benchmark Nifty Index, which gained 8% in the same period.

The outperformance was supported by a weak crude oil price environment and the government's commitment to fund up to ₹30,000 crore of FY26 LPG losses for oil marketing companies (OMCs).

Brokerage firm Elara Capital has reiterated its 'Buy' rating on IOC, while trimming its target price by 10% to ₹193. Despite the cut, the revised target still implies a potential 38% upside from current levels.

Elara remains positive on OMCs, citing expectations of crude oil prices staying below $70 per barrel in FY26. Its view is underpinned by robust long-term integrated margins, estimated at over ₹3,500 per tonne versus an average of ₹2,900 per tonne in the past five years, on the back of weaker crude assumptions and government compensation of ₹30,000 crore for FY26 LPG losses.

The brokerage also reiterated that OMCs are likely to be allowed higher margins to support energy transition capex.

That said, Elara has cut IOC's earnings estimates for FY26, FY27, and FY28 by 7%, 8%, and 4%, respectively, factoring in a weaker rupee and lower retail diesel margins, based on the Q2FY26 trend.

IOC's June-quarter results, meanwhile, came in below analyst expectations.

Net profit for the period fell 22% from last year to ₹5,689 crore, which was lower than the CNBC-TV18 poll of ₹7,374 crore.

Revenue for the quarter stood at ₹1.93 crore, higher than the CNBC-TV18 poll expectation of ₹1.8 lakh crore and 1% lower compared to the previous quarter.

EBITDA or Earnings Before Interest, Tax, Depreciation and Amortisation fell by 7% from the March quarter to ₹12,607 crore, which was lower than the ₹15,310 crore figure.

EBITDA margin for the quarter fell to 6.53% from 7% last quarter, while the CNBC-TV18 poll had projected the figure to be 8.5%.

Gross Refining Margins, or the difference between the total value of petroleum products produced by a refinery and the cost of the crude oil used as raw material, stood at $2.15 per barrel, which is well below the previous quarter's figure of $7.97 per barrel and lower than the CNBC-TV18 poll expectation of $7.1 per barrel.

Shares of Indian Oil Corporation ended 1.23% higher on Tuesday at ₹142.03. The stock is down 6% in the last one month.

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