Oil India Tops PL Capital’s Q3 Picks; Subdued Quarter Expected Amid Crude Weakness

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PL Capital Report

PL Capital expects the oil and gas sector to deliver a muted performance in Q3 FY26 on a sequential basis, despite resilient refining margins. Aggregate revenues are projected to rise 3.5% QoQ, while Ebitda is estimated to remain flat at Rs 1,04,200 crore, and net profit is likely to decline 4.3% QoQ.

Oil marketing companies are expected to benefit from strong crack spreads and lower brent crude prices, with standalone Ebitda estimated at Rs 31,260 crore, up 51.3% YoY but flat QoQ. However, rupee depreciation could weigh on marketing margins, limiting upside.

In contrast, upstream companies face earnings pressure as weaker crude realizations impact profitability. PL Capital forecasts Ebitda for Oil and Natural Gas Corporation Ltd. and Oil India Ltd. at Rs 17,460 crore, down 8.2% QoQ, reflecting the impact of Brent crude averaging $63.6/barrel of oil versus $69.1/bbl in Q2 FY26.

Reliance Industries Ltd. is expected to report a 5.3% YoY increase in consolidated Ebitda, supported by improved refining margins in its standalone segment.

Despite near-term headwinds, PL Capital maintains a Buy rating on Oil India, citing strong volume growth prospects and upcoming NRL commissioning as key drivers.

Top picks:

PL Capital maintains a positive stance on select upstream and city gas distribution names despite near-term sector headwinds. Ratings across coverage remain unchanged, except for Indraprastha Gas, which has been upgraded to Hold from Reduce following the recent price correction.

Oil India continues to be a top pick, supported by expected volume growth and the upcoming commissioning of the Numaligarh Refinery Ltd., which should enhance earnings visibility.

ONGC is also well-positioned to benefit from upcoming projects and well optimisation initiatives, driving medium-term production growth.

Among CGDs, Mahanagar Gas has corrected meaningfully and now offers attractive upside potential, underpinned by expectations of sustained volume growth and margin resilience.

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