Accumulate Indian Oil Corporation; target of Rs 140: Prabhudas Lilladher

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Refining performance: IOCL's refining throughput increased 2.8% YoY to 18.1mmt in Q2FY27, with a reported GRM (net of SAED) of USD18.5/bbl, up from USD15.6/bbl in Q1FY27.
  • Inventory gains: Refining and marketing inventory gains of INR69bn provided significant support to overall profitability.
  • Marketing volumes: Total domestic sales volume of petroleum products stood at 20.9mmt, with MS and HSD volumes declining 2.2% and 17.2% QoQ, respectively.
  • Petrochemicals: Petrochemical volumes recovered 11.4%/11.7% YoY/QoQ to 0.9mmt, with segment EBIT increasing to INR5.2bn in Q2FY27.

Thesis Validation Checklist

To validate the investment thesis, investors should watch for:

  • Sustained refining performance: IOCL's ability to maintain strong refining margins and throughput.
  • Inventory management: The company's ability to manage inventory levels and optimize gains from inventory valuation.
  • Marketing volume growth: Recovery in MS and HSD volumes, driven by increased demand and market share gains.
  • Petrochemical segment performance: Continued improvement in petrochemical volumes and EBIT.
  • LPG under-recovery buffer: Management of LPG under-recoveries and the impact on profitability. Investors should monitor these factors over the next 12 months to assess the validity of the investment thesis.