Accumulate Indian Oil Corporation Ltd for the Target Rs. 195 By Prabhudas Lilladher Ltd
Quick Pointers:
* IOCL received Rs24.2bn of LPG compensation.
* Reported GRM came in at USD12.2/bbl; Core GRM at USD13.5/bbl.
Refining throughput surged to 19.4mmt (utilization of 109.7%) vs 17.6mmt QoQ, while reported/core GRMs improved to USD 12.2/13.5/bbl from USD10.7/8.9/bbl QoQ, driven by continued strength in product cracks in Q3FY26. Domestic sales volumes increased by 14.5%/4.8% QoQ/YoY to 23.1mmt. Implied gross marketing margin (GMM) stood at Rs7.0/ltr, broadly flat QoQ and YoY. Strong GRMs and higher volumes drove a sharp standalone EBITDA beat, rising to Rs212.9bn (PLe Rs137.2bn; BBGe Rs172.6bn) compared with Rs145.8bn in Q2FY26 and Rs71.2bn in Q3FY25. Standalone PAT increased sharply to Rs125.9bn (PLe Rs70.8bn; BBGe Rs98.8bn) vs Rs76.1bn in Q2FY26 and Rs28.7bn in Q3FY25. Petchem remained a drag, with EBIT loss of Rs36.2bn vs EBIT profit of Rs1.6bn in Q2FY26 amid weak margins. Capex target for FY26 stands at Rs347bn, of which IOCL has incurred Rs243.4bn as of Dec’25. We build in GRMs of USD6.3/6.0/bbl and blended GMM of Rs4.9/4.8/ltr for FY27E/FY28E. We revise our valuation multiple to 1.1x Dec’27E (from 1.0x), reflecting improved operating performance, and reiterate our ‘Accumulate’ rating with a TP of Rs195 (earlier Rs175), driven by sustained strength in diesel cracks and no expectation of major refinery maintenance shutdowns.
* Reported/Core GRM improved: Refining throughput increased to 19.4mmt in Q3FY26 compared with 17.6mmt in Q2FY26 and 18.1mmt in Q3FY25, with utilization at 109.7%. Reported GRM improved to USD12.2/bbl vs USD10.7/bbl and USD3.0/bbl in Q2FY26 and Q3FY25 respectively. Core GRM improved sharply to USD13.5/bbl, up from USD8.9/bbl in Q2FY26 and USD6.6/bbl in Q3FY25.
* Petrochem losses increased: Sale of petrochemicals stood at 0.9mmt during the quarter vs 0.8mmt in Q2FY26. IOCL reported an EBIT loss of Rs3.6bn in Q3FY26 vs a profit of Rs1.7bn in Q2FY26, largely due to weaker spreads, which continue to remain at subdued levels due to weak demand and new capacity additions.
* 9MFY26 EBITDA/PAT increased sharply: EBITDA more than doubled to Rs484.8bn, while PAT increased by more than 4x to Rs258.9bn respectively in Q3FY26. Company received Rs24.2bn of LPG compensation out of total expected compensation of Rs144.9bn. As on 31st Dec’25, cumulative net negative LPG buffer stood at Rs243.2bn.
* Capex allocations - Company has already spent Rs243.4bn in capex, including equity investment in JVs/Subs. Of which, Refinery - Rs122.6bn, Pipelines – Rs13.5, Marketing – Rs73.7bn, Petchem – Rs21.8bn, R&D – Rs2.2bn, E&P – Rs1.6bn, CGD – Rs2.2bn and remaining for equity investments and JVs. Capex target for FY26 stands at Rs347bn.
Please refer disclaimer at Report
SEBI Registration number is INH000000933.
