Surging oil prices are a worry, but for some stocks, it could also help take the gains forward. Oil India shares are in focus after JM Financial retained its ‘Buy’ rating and raised the target price to Rs 620 from Rs 585, implying a potential upside of 22.3%. The brokerage revised its earnings estimates upward after the state-run oil explorer posted a stronger-than-expected March quarter performance, supported by higher crude production, lower dry well write-offs and healthy contribution from Numaligarh Refinery.
JM Financial said Oil India’s standalone profit after tax for the March quarter came in at Rs 1,789.5 crore, sharply ahead of its estimate of Rs 1,120 crore and consensus expectations of around Rs 1,170 crore. The brokerage also raised FY27 and FY28 earnings estimates by 8% to 12% after factoring in the recent reduction in royalty rates for onshore crude fields.
The brokerage expects Oil India’s earnings trajectory to remain strong over the next few years as crude output rises and the Numaligarh refinery expansion starts contributing meaningfully.
“Robust crude output and lower dry well write-off drive beat,” JM Financial said in the report.
Oil India earnings beat estimates despite forex loss
JM Financial said Oil India’s March quarter standalone EBITDA stood at Rs 1,966.4 crore, lower than its estimate of Rs 2,460 crore because of higher operating expenses and a large foreign exchange loss linked to dollar-denominated debt.
The brokerage noted that operating expenses rose to Rs 1,024 crore during the quarter, mainly due to a foreign exchange loss of Rs 490 crore. Net crude realisation also came in lower than estimates at $75.3 per barrel against JM Financial’s estimate of $78 per barrel.
However, lower dry well write-offs helped offset some of that pressure. Oil India reported dry well write-offs of Rs 145.9 crore during the quarter against JM Financial’s estimate of Rs 700 crore. Higher other income and stronger crude output also supported profitability.
Oil India’s quarterly earnings per share came in at Rs 11.
Crude production growth remains a key positive
JM Financial expects Oil India’s production profile to remain healthy over the medium term. The brokerage said cumulative output growth could reach nearly 20% between FY27 and FY29, aided by the commissioning of the Indradhanush gas pipeline.
Crude production during the March quarter rose 5.6% year-on-year and 3.8% sequentially to 0.891 million metric tonnes. Crude sales volumes increased 6.5% quarter-on-quarter to 0.87 million metric tonnes.
The brokerage added that sales as a percentage of production remained within the company’s historical range of 97% to 99%, indicating stable operational performance.
“Oil India’s earnings are likely to expand at a robust 14–18% CAGR over the next three–five years,” JM Financial said.
Gas production during the quarter stood at 0.754 billion cubic metres, while gas sales volumes declined because some customers temporarily shut operations. Domestic gas realisation remained steady at $6.7 per mmbtu.
Numaligarh Refinery adds strength to earnings outlook
JM Financial also remained positive on Numaligarh Refinery Ltd, where Oil India owns a 69.73% stake. The brokerage said the refinery’s gross refining margin before excise duty benefits improved sharply during the March quarter.
Gross refining margins stood at $21.2 per barrel during the quarter against $16.3 per barrel in the December quarter. Crude throughput improved to 808 thousand metric tonnes, while refinery utilisation rose to 108%.
“NRL’s GRM is strong at USD 21.2/bbl in Q4FY26,” JM Financial said in the report.
The brokerage expects the ongoing expansion of Numaligarh Refinery from 3 million metric tonnes per annum to 9 million metric tonnes per annum by the end of FY27 to become a major earnings driver for Oil India over the next few years.
JM Financial estimates Oil India’s adjusted net profit at Rs 9,673.8 crore in FY27 and Rs 12,456.3 crore in FY28. Earnings per share are projected at Rs 59.5 for FY27 and Rs 76.6 for FY28.
Brokerage says valuation remains attractive
JM Financial said Oil India continues to trade at reasonable valuations despite the recent rally in the stock.
At the current market price, the brokerage said Oil India trades at 6.6 times FY28 estimated earnings and 1.1 times FY28 estimated book value.
The valuation framework used by JM Financial assigns Rs 375 per share to Oil India’s standalone business. The brokerage valued Oil India’s stake in Numaligarh Refinery at Rs 195 per share after discounting by one year to FY28. Another Rs 50 per share was attributed to the company’s investment in Indian Oil Corporation.
The brokerage also pointed out that changes in crude realisation could materially affect earnings and valuation.
FY27 and FY28 estimates revised upward
JM Financial raised its FY27 earnings estimate by 12.3% and FY28 estimate by 8.1% after revising assumptions related to royalty rates and operational growth.
The brokerage now expects Oil India’s revenue to rise to Rs 46,434.1 crore in FY27 and Rs 70,554.9 crore in FY28. EBITDA is projected at Rs 15,020.9 crore for FY27 and Rs 19,827.8 crore for FY28.
“Reiterate Buy based on Brent crude price assumption of $ 75/bbl FY28 onwards,” JM Financial said.
Conclusion
JM Financial’s latest report suggests the brokerage house continues to see strong earnings visibility for Oil India despite volatility in global crude prices. Rising crude production, improving refinery margins and lower royalty burden remain the key factors behind the brokerage’s positive stance.
With JM Financial raising the target price, Oil India is likely to stay on the Street’s radar among oil and gas stocks in the near-term.
Disclaimer: Investment recommendations, rating upgrades, and target prices provided by brokerages are for informational and educational purposes only and do not constitute an offer, solicitation, or personal investment advice. Performance estimates and historical returns may not predict future market movements. Readers should independently evaluate corporate fundamentals and consult a SEBI-registered investment advisor before making any financial decisions. This disclaimer has been generated using AI to support user well-being and responsible content consumption.
