Mahanagar Gas, HPCL Among Dolat Capital's Top Stock Picks In Oil And Gas Sector; Q1 Results Preview

HPCL/BPCL/IOCL to report Ebitda of Rs 93 billion / Rs 108 bn, Rs 172 bn respectively, primarily driven by super normal GMM on petrol/diesel @ an average of Rs 13/lt vs Rs 8/lt in Q4; a 37% QoQ decline in LPG under-recovery due to falling LPG prices and a Rs 50/cyl. cut in Apr’25, Govt. increased Rs 2/lt excise duty on petrol and diesel in Apr'25 to compensate the domestic LPG under-recovery; if in case compensation is provided, then could lift equity value by Rs 7/Rs 4/Rs 2 per sh (fall in net debt) resp; Sing Benchmark GRM jumped 80% QoQ on account of stronger diesel, petrol, LPG, and ATF cracks; and restored Russian crude supply.

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Dolat Capital Report

In Q1 the ‘Oil & Gas sector’ in our coverage universe showed a sharp jump, with Ebitda likely up 33% YoY/17% QoQ to Rs 1,061 billion and PAT up 53% YoY/19% QoQ to Rs 540 billion. Key factors driving sector growth include-

1. super-normal gross marketing margin on petrol and diesel with minimal impact of Rs 1.8/litre from LPG under-recovery;

2. a rebound of Singapore gross refining margin to $5.6/bbl from a 15-quarter low of $3.1/bbl;

3. a 37% decline in LPG under-recovery, raising hopes for government compensation;

4. expectation of QoQ margin improvements in CGDs despite APM de-allocation, supported by lower crudelinked LNG cost with reduction in HH prices and INR appreciation of 1% QoQ.

We, thereby, expect CGDs to post Ebitda/PAT growth of 13%/11% QoQ. However, in Q1 FY26, India's LNG imports declined 4% YoY, and Petronet LNG lost 7% market share vs last year to other LNG terminals.

Dahej/Kochi utilisation to be 92%/25% in Q1 FY26. GAIL's transmission volume would be impacted due to lower gas consumption by power/Fert. Plants.

Our top picks are Mahanagar Gas, HPCL and Reliance Industries.

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