Brokerages have turned constructive on Indian Oil Corporation after a sharp Q3FY26 earnings beat, led by stronger-than-expected refining performance.
Jefferies reiterated a Buy rating with a price target of Rs 190, valuing the stock at 1.1x FY27 forward price-to-book. Its bull case pegs upside at Rs 205, while the downside scenario stands at Rs 110. Citi also maintained a Buy, citing an expected total return of over 11%, supported by dividends and improving refining dynamics.
Jefferies noted that EBITDA came in 28% above its estimate and 21% above consensus, driven by robust gross refining margins (GRMs). Reported GRMs stood at $12.2 per barrel, well ahead of expectations, aided by strong diesel cracks and inventory gains.
Citi echoed the optimism, highlighting that IOCL's EBITDA of Rs 20,800 crore not only rose 43% sequentially but also surpassed peer performance at BPCL and HPCL. Net income climbed 59% quarter-on-quarter to Rs 12,100 crore, supported by lower costs, better refining economics, and higher-than-expected other income.
Marketing Margins Steady
On the marketing front, performance remained broadly in line with expectations. Jefferies estimates marketing profitability was around 2% above forecasts, with blended petrol and diesel margins averaging Rs 4-11 per litre. Importantly, domestic marketing volumes rose about 5% year-on-year in Q3FY26, outpacing India's overall demand growth, implying a market share gain of nearly 100 basis points.
Citi added that while core petrol and diesel margins softened sequentially, LPG under-recoveries declined sharply. IOCL has already received Rs 2,400 crore in LPG compensation since November 2025 and is set to receive the balance of its Rs 14,500 crore receivable in monthly tranches through October 2026, providing visibility to earnings support.
Russian Crude Loss A Key Risk To Margins
Despite the upbeat tone, brokerages flagged crude sourcing as a key medium-term risk. Jefferies cautioned that a potential shift away from discounted Russian crude toward US crude could compress refining margins from FY27 onwards. Historically, US crude has been procured at a premium to Brent, which could weigh on profitability if discounts fade.
That said, softer global crude prices and easing concerns around excise duty hikes are expected to support near-term marketing margins.
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