Oil And Gas Stocks To 'Buy': Motilal Oswal Bets On HPCL, GAIL As It Top Pick — Here's Why

HPCL currently trades at 1.3x FY26E P/B, which the brokerage believes offers a reasonable margin of safety as we estimate FY26E RoE of 17.3%. The brokerage expect GAIL’s RoE to improve to ~16% in FY26 from 9.5% in FY23, with a healthy FCF generation of Rs 81 billion in FY26 (versus -Rs 45.3 billion in FY23), which we believe can support its valuations..NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Motilal Oswal Report.Hindustan Petroleum Corporation Ltd. remains our preferred pick among the three oil marketing companies. We model a marketing margin of Rs 3.3/lit for both motor spirit and high speed diesel in FY26/FY27, while the current MS and HSD marketing margins are Rs 9.1/lit and Rs 6.6/lit, respectively. We view the following as key catalysts for the stock: the de-merger and potential listing of the lubricant business,the commissioning of its bottom-upgrade unit in Q4 FY25, the start of its Rajasthan refinery in CY25, andLPG underrecovery compensation. HPCL currently trades at 1.3x FY26E P/B, which we believe offers a reasonable margin of safety as we estimate FY26E RoE of 17.3%.Our SoTP-based target price includes: The standalone refining and marketing business at 6.5x Dec'26E Ebitda. Rs 38/share as potential value unlocking from the de-merger of the lubricant business. HMEL at 8x P/E is based on its FY24 PAT (HPCL’s share), deriving a value of Rs 35/share. Chhara Terminal at 1x P/B and HPCL’s HRRL stake at 0.5x of HPCL’s equity investment in the project to date; MRPL’s stake is valued at our target price. All these lead to a revised target price of Rs 490. Reiterate Buy. .GAIL: We reiterate our Buy rating on GAIL with a target price of Rs 255. During FY24-27, we estimate a 15% CAGR in PAT driven by: an increase in natural gas transmission volumes to 154 mmscmd in FY27 from 120 mmscmd in FY24; substantial improvement in petchem segment’s profitability over H2 FY25- FY27 as the new petchem capacity will be operational and spreads are bottoming out; healthy trading segment’s profitability with guided Ebit of at least Rs 45 billion. We expect GAIL’s RoE to improve to ~16% in FY26 from 9.5% in FY23, with a healthy FCF generation of Rs 81 billion in FY26 (versus -Rs 45.3 billion in FY23), which we believe can support its valuations..Click on the attachment to read the full report:.'Buy' Union Bank of India Shares To Get An Upside Of 15% Says Motilal Oswal — Here's Why.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Oil And Gas Stocks To 'Buy': Motilal Oswal Bets On HPCL, GAIL As It Top Pick — Here's Why

Motilal Oswal has BPCL, Petronet LNG and IGL as Neutral rated stocks in its coverage, the three stocks have delivered a return of -10% to +58% in the last two years.

NDTV Profit

NDTV Profit

Follow Us

DISCOVER US FASTER

DOWNLOAD THE APP