Oil India share price could rise in absolute terms over the next 30 days, according to Morgan Stanley. The brokerage firm has assigned an 80%+ probability to the scenario.
The PSU stock gained as much as 3.09% to Rs 514.45 apiece on the BSE Thursday, led by strong buying momentum amid a surge in crude prices. Brent oil price has surpassed $100 per barrel.
Morgan Stanley believes Oil India offers differentiated exposure to tight oil and refining markets, with rapidly declining global fuel inventories supporting refining margins. The brokerage noted that Oil India's own crude consumption at its refinery allows it to capture the integrated upside despite windfall taxes on fuel in India.
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With growing oil production in the second half of 2026 and good progress on the company's plan to triple refinery capacity by 2027, the brokerage expects Oil India to be a key beneficiary of the ongoing “refining golden age”.
With around 80% of growth capex already deployed, Morgan Stanley expects the upcoming capacity ramp-up at Numaligarh Refinery Ltd. (NRL) to provide another leg to earnings and free cash flow growth from 2QFY27.
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Valuation remains attractive
Morgan Stanley said Oil India's valuation remains attractive at around 7x one-year forward P/E, based on an implied Brent crude price assumption of $67 per barrel. The brokerage highlighted that the company has consistently delivered 15%+ return on equity (ROE).
However, the brokerage remains Equal-Weight on Oil India stock as the upside from tight global fuel markets is partly offset by the lack of growth in domestic gas production.
Morgan Stanley values Oil India's core domestic exploration and production business using a DCF approach, while its refinery business is valued using EV/EBITDA. The brokerage values the company's Russian E&P assets using P/B and applies a 40% holding-company discount to the market value of its IOCL stake.
For the E&P business, Morgan Stanley assumes an 11.9% cost of capital, production through 2040 and a 2% terminal growth rate. Oil India's 69.63% stake in NRL is valued at 7x FY29 EV/EBITDA, in line with global comparable companies.
Key risks
Potential upside triggers include a material discovery in Oil India's exploration portfolio, lower-than-expected operating costs and completion of the Indradhanush pipeline.
On the downside, Morgan Stanley sees risks from slower-than-expected production growth, declining net realisations on sweeter crude, unattractive acquisitions and a potential decline in global natural gas demand.
At 9:55 AM, Oil India share price was trading 2.05% higher at Rs 509.25 apiece on the BSE.
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