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In Q1FY27, CPCL’s revenue beat CIE estimate by 13% at INR 274 Bn, while EBITDA was in line at INR 15,549 Mn (CIE estimate of 15,670 Mn) and adjusted PAT reached INR 9,928 Mn (CIE estimate of 9,539 Mn). Concurrently, the global middle distillate market faces a severe supply squeeze driven by geopolitical chokepoints, depleted hub inventories and Russian export constraints. With Chinese teapot rationalisation, ageing infrastructure and inelastic demand, diesel crack spreads will remain structurally elevated through FY27. We have revised our FY27E/28E for Revenue, EBITDA, PAT by -2%/0%, 10%14%, 10%/14% respectively, as we now expect better product cracks as compared to our previous assumptions. We have lowered terminal growth rate from 3.0% to 1.5% as we expect higher pressure on global diesel demand in the next decade compared to our previous estimate. On the strength of the above, we raise our TP to INR 1,540/sh, up from INR 1,265/sh, and maintain a ‘BUY’ rating on the stock

Revenue Beat while EBITDA in line with CIE estimates

* Revenue for Q1FY27 was up 84.8% YoY & up 62.7% QoQ at INR 274 Bn (vs CIE est. of INR 243 Bn)

* EBIDTA for Q1FY27 was up 1,476.4% YoY and down 23.6% QoQ at INR 15,549 Mn (vs CIE estimate of INR 15,670 Mn). EBITDA margin stood at 5.7%, up 502 bps YoY (vs CIE estimate of 6.5%)

* Adjusted PAT for Q1FY27 was INR 9,928 Mn against a loss of INR 401 Mn in Q1FY26. Adjusted PAT for Q1FY27 was down 30.2% QoQ at INR 9,928 Mn (vs CIE estimate INR 9,539 Mn). Adjusted PAT margin improved 404bps YoY, reaching 3.8% (vs CIE estimate of 3.9%)

Geopolitical Friction and Depleted Inventory Hubs Support Global Distillate Cracks

Global middle distillate fundamentals are tightening sharply as structural supply shortfalls coincide with geopolitical disruptions and depleted inventories. Europe continues to face a persistent deficit, exacerbated by reduced refinery throughput in the Middle East and elevated shipping risks around the Strait of Hormuz. At the same time, Russia's ability to bridge this gap remains limited, with refinery operations continuing to be affected by drone attacks. While US refiners are operating at near-record distillate production levels of approximately 5.3 million barrels per day, robust export demand from Europe and South America is drawing significant volumes out of the domestic market, leading to a steady erosion of US inventories. With storage levels across major trading hubs in Europe and Singapore already hovering near minimum operational thresholds, the global distillate market has little buffer left to withstand any additional supply disruptions.

A Supportive Diesel Cycle Strengthens the CPCL Investment Case

We expect diesel cracks to remain structurally strong through FY27 as the global middle distillate market continues to face persistent supply-side constraints. The rationalisation of China's independent refining sector has reduced the market's ability to respond quickly to supply disruptions, while ageing refining infrastructure across several regions continues to increase the risk of unplanned outages. With seasonal refinery maintenance scheduled ahead of the winter demand period, opportunities to meaningfully replenish inventories appear limited. At the same time, demand from freight transportation, agriculture and industrial activity remains relatively price inelastic, allowing refiners with available distillate production capacity to capture sustained margin premiums. In this backdrop, CPCL is well positioned to benefit from a supportive diesel pricing environment and stronger refining economics.

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