'Add' Indian Oil Shares, Maintains Dolat Capital Post Q1 Results — Check Target Price

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Dolat Capital Report

We upward revise our FY26E/FY27E EPS estimates of Indian Oil Corporatio Ltd. by 37.7%/10.4%, primarily driven by-

1. Government approved Rs 300 billion LPG compensation to oil marketing companies, with Indian Oil expected to receive Rs 138 billion (reflecting its 46% market share) in 12 tranches (nine in FY26 and three in FY27); and

2. Stronger than expected gross marketing margin, with assumptions raised to Rs 5.5/lt (earlier Rs 4.8/lt).

However, we have cut the GRM assumption to US$6/6.25 per bbl for FY26E/FY27E on account of softer GRM and huge inventory losses in Q1 FY26.

We maintain ‘Accumulate’ recommendation on the stock with revised SoTP-based target price of Rs 165/share (vs earlier Rs 154/share).

In Q1 FY26 IOCL posted headline numbers much lower than our estimated Ebitda/PAT mainly due to crude inventory loss of $4.8/bbl.

Key Highlights include:

1. Total inventory loss stood at Rs 65 billion; our calculations suggest Rs 56 billion/Rs 9 billion Refining /Marketing in Q1 FY26;

2. Russian crude accounted for 24% of total crude processed during Q1 vs 22% in FY25. Discounts on Russian crude at $1.5/bbl compared Dubai;

3. the utilisation of expanded refinery capacities would be very minimal in FY27E, with full ramp up in utilization likely over 24 months post mechanical completion; and

4. petrochemical performance continued to post Ebit loss due to weak margins.

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