- Indian Oil reported a standalone net profit of Rs 21,630 crore in Q2 FY27, reversing a prior loss
- EBITDA surged to Rs 30,297 crore, with refining margins and inventory gains driving performance
- Brokerages show mixed views, with Kotak Neo cautious and JPMorgan, Jefferies, Emkay more positive
Indian Oil Corporation (IOCL) reported a sharp turnaround in its September-quarter earnings, with standalone net profit rising to Rs 21,630 crore from a loss of Rs 2,661 crore in the preceding quarter. The performance majorly exceeded market expectations, supported by a sharp improvement in refining and marketing profitability.
However, the outlook for the second half of FY27 is less straightforward. Elevated crude oil prices could squeeze marketing margins, while limited scope to increase retail fuel prices may force oil marketing companies (OMCs) to absorb higher costs. Brokerages are divided on the outlook, with Kotak Neo maintaining Reduce, while JPMorgan and Jefferies remain positive. Emkay has retained Add.
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Their target prices range from Rs 135 to Rs 175, reflecting differing expectations around refining gains, marketing profitability and the impact of higher crude prices.
IOCL Q2 Results: Net Profit Beats Estimates, EBITDA Surges
Indian Oil's standalone revenue declined 4.6% sequentially to Rs 2.50 lakh crore from Rs 2.62 lakh crore in Q1 FY27, broadly in line with analysts' estimates.
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Operating performance, however, improved sharply. EBITDA surged to Rs 30,297 crore from Rs 1,947 crore in the preceding quarter, considerably ahead of the market estimate of Rs 11,600 crore. EBITDA margin expanded to 12.1% from 0.7%.
Net profit stood at Rs 21,630 crore, compared with a net loss of Rs 2,661 crore in Q1 FY27 and a market estimate of Rs 6,268 crore.
Emkay's assessment of the adjusted performance also pointed to a major earnings beat. It highlighted adjusted EBITDA and adjusted profit after tax of Rs 27,690 crore and Rs 18,970 crore, respectively, supported by better refining margins and inventory gains.
The brokerage noted that reported gross refining margin (GRM) stood at $36.7 per barrel, against its estimate of $26 per barrel. The blended marketing margin was negative Rs 2 per litre, better than its estimate of negative Rs 6 per litre.
Kotak Neo Flags H2 Risks, Maintains Reduce
Kotak Neo maintained its 'Reduce' rating on IOCL with a fair value of Rs 135, warning that the second half of FY27 could be challenging.
The brokerage expects elevated crude prices to pressure marketing profitability, particularly as limited scope for retail fuel price increases could force OMCs to absorb higher input costs.
It cut its FY27 EBITDA estimate by 7.6%, while refinery commissioning delays add another layer of uncertainty to the earnings outlook.
JPMorgan Remains Overweight, Raises EPS Estimate
JPMorgan maintained its 'Overweight' rating on IOCL with a target price of Rs 170.
The brokerage raised its FY27 EPS estimate by 16.1%, while highlighting the company's planned annual capital expenditure of Rs 30,000-40,000 crore over the next four to five years across refining and new ventures.
IOCL is targeting 31 GW of renewable capacity over five years, while refinery expansion projects are expected to be completed in FY27.
However, JPMorgan also flagged elevated crude prices as a threat to near-term marketing profitability.
Jefferies Cuts Target To Rs 175, But Retains Buy
Jefferies maintained its 'Buy' rating on IOCL but reduced its target price to Rs 175 from Rs 180.
The brokerage expects refining margins to remain strong through the winter months, supported by global supply disruptions and low inventories. It also highlighted IOCL's plan to undertake around 20 million metric tonnes (MMT) of brownfield refinery expansion by December 2026, alongside its renewable energy target of 30 GW by 2030.
Jefferies sharply raised its FY27 EPS estimate, although it cautioned that elevated crude prices and marketing losses could weigh on H2 profitability.
Emkay Retains Add, Cuts Target To Rs 150
Emkay retained its 'Add' rating on IOCL but reduced its target price to Rs 150 from Rs 160.
The brokerage said the Q2 performance benefited from better refining margins and inventory gains. It also highlighted the company's efforts to diversify crude sourcing amid supply volatility, with Russian crude accounting for around 55% of its sourcing and spot purchases making up 87% in the first half of FY27, compared with around 50% in FY26.
IOCL booked Rs 3,620 crore in LPG subsidy during the quarter, while LPG under-recoveries declined 38% sequentially to Rs 6,400 crore. However, Emkay expects under-recoveries to increase in Q3 FY27 to around Rs 300 per cylinder.
The brokerage has made a significant change to its earnings outlook, now building in an adjusted net loss of Rs 8,800 crore for FY27, against its earlier estimate of a net profit of Rs 9,400 crore. It also cut FY28 and FY29 EPS estimates by 8-9%, citing margin adjustments and uncertainty in the operating environment.
What Should IOCL Investors Watch Next?
The key question for IOCL is whether strong refining profitability can cushion the impact of higher crude prices on marketing margins.
While global supply disruptions and low inventories could support refining margins through the winter, the ability to pass on higher crude costs to consumers remains uncertain. Delays in refinery commissioning and the trajectory of LPG under-recoveries are additional monitorables.
The brokerage split reflects these competing factors. JPMorgan and Jefferies see earnings support from refining and longer-term expansion plans, while Kotak Neo is more cautious about near-term marketing profitability. Emkay's revised FY27 loss estimate underlines the uncertainty around earnings visibility in the second half.
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