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Q1FY26 preview: OMCs stellar, RIL steady, gas weaker

Marketing margins to drive earnings for OMCs; refining lends backup: Petrol marketing margins grew 28% QoQ to Rs12.8/ltr in Q1FY26, while diesel margins jumped to Rs9.2/ltr from Rs5.1/ltr QoQ, on account of lower crude oil prices amid frozen retail prices. Brent averaged at ~USD68/bbl in Q1FY26, 10% lower QoQ, and recorded a weak close at ~USD68/bbl, down by ~USD9/bbl between the two quarter ends. This decline is expected to result in refining inventory losses of USD1.5-2/bbl each for BPCL and HPCL, while IOCL could face a higher inventory loss of ~USD2.5/bbl due to a relatively longer inventory cycle. Benchmark GRM rose to ~USD5.6/bbl from USD3.2/bbl QoQ, largely owing to 38% QoQ uptick in gasoline spreads, while gasoil grew 8% QoQ. Russian crude imports rebounded, amid range-bound discounts, while the Middle East OSP premiums were flat at USD1.9/bbl. We expect BPCL and HPCL to see 40-45% uptick each in EBITDA QoQ, while IOCL is likely to witness a 17% improvement due to the base effect. Q1FY26 PAT for IOCL/BPCL/HPCL is estimated at Rs68.5/65.9/46.5bn, respectively.

Lower upstream realizations, albeit costs also down: ONGC/Oil India’s total crude output is estimated to decline 0.7%/grow 1% YoY, whereas gas is forecasted to fall 1%/grow 3%. The scraping of windfall levy implies market-linked oil realizations for Q1FY26. Despite lower output, we estimate EBITDA will increase 17% QoQ for ONGC on lower expenditure profile; OIL is likely to see an 8% uptick due to lower opex and statutory levies. We estimate ONGC/OIL’s RPAT at Rs80.6/12.3bn during Q1FY26. We expect sequential improvement in NRL earnings on better GRMs and excise duty hikes.

Better gas marketing margin for GAIL, weaker-than-expected volumes for bulk players: We estimate GAIL’s Q1FY26 standalone PAT will come at Rs22.4bn, up 9% QoQ, as we expect higher gas marketing margins and lower transmission opex to be partly offset by softness in petchem and LPG. Gas transmission volumes could be up 2% QoQ, while petchem earnings should decline QoQ due to lower realizations amid expected plant turnaround. LPG earnings are likely to decline QoQ due to lower realization and higher gas cost amid reduced APM allocation. Other income would also decline QoQ. GSPL’s volume is likely to be down 29% YoY and up 1% QoQ, while EBITDA is likely to increase by 46% QoQ on lower opex. PLNG’s Dahej utilization should remain range-bound at ~87%, while Kochi is expected to decline to 19% amid muted gas demand. For PLNG, we expect 5% lower APAT QoQ at Rs8.6bn, with lower spot margin at USD7/mmbtu.

CGDs likely to see better margins, MGL to continue volume outperformance: MGL’s double-digit run rate is expected to sustain, with 11% YoY volume growth in Q1FY26, while unit EBITDA should recover to Rs9.8/scm from Rs8.3/scm QoQ, driven by better realizations and lower gas costs. EBITDA is expected to improve 21% QoQ to Rs3.8bn. IGL’s EBITDA is expected to grow by 43% QoQ to Rs5.5bn, as unit EBITDA is expected to be up 40% at Rs6.5/scm, while volumes are likely to grow by 7% YoY and 1% QoQ. Morbi IPNG volumes are expected to decline due to competitive propane pricing; however, higher non-morbi volumes should keep Gujarat Gas’s overall volumes steady at 9.3mmscmd QoQ. EBITDA/scm would expand by 6% QoQ to Rs5.7 on lower expenses. PAT should decline 1% YoY to Rs3.3bn, up 14% QoQ.

RIL’s consol EBITDA to be up 3% QoQ, mainly led by Jio and O2C amid tepid upstream: We estimate RIL’s consol EBITDA to be up 3% QoQ at Rs450bn, with O2C up 3% to Rs155bn on better GRMs. We expect net subscriber adds of 6mn for Jio with 1% higher ARPU at Rs209, owing to residual impact of tariff hike. Retail EBITDA should be up 19% YoY at Rs67bn, supported by base effect (flat QoQ), while upstream EBITDA should decline 5% QoQ to Rs49bn. We estimate consol APAT (after MI) to increase by 28% YoY/flat QoQ to Rs193bn. We have not built in capital gains on a stake sale in Asian Paints.

Steady core volumes for Gulf Oil Lube; better margins: EBITDA/ltr is likely to improve by 9% QoQ to Rs17.8 on lower unit opex and supported by better gross margins. We expect Q1FY26E EBITDA/PAT to be up 19%/17% YoY to Rs1.4bn/1.0bn

Decent results for Indigo amid challenges; fuel cost down: We estimate yields to dip 1% YoY to Rs5.17, while fuel cost/ASK is expected to be 9% lower QoQ. PLFs should decline by ~175bps YoY to 85%, as ASK/RPK rise 15%/13% YoY (down 1%/4% QoQ) to 41.8/35.5bn. We estimate PBT/ASK (ex-forex) to be 19% lower YoY to Rs0.64, with net profit at Rs23.2bn for Q1FY26 (vs Rs27.3bn YoY). There would be some forex losses.

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