Buy IOCL; target of Rs 145: Motilal Oswal

Motilal Oswal's research report on IOCL

IOCL’s reported 3QFY25 financial performance was below our expectations, mainly led by a weak reported refining margin. Inventory losses stood at USD3.7/bbl (INR52b) in 3Q. However, the marketing segment reported an in-line performance during the quarter. PAT was dragged by forex losses amounting to INR20.5b in 3Q. On a sequential basis, LPG prices have remained stable, and under-recoveries should start tapering off from 1QFY26 onwards. Further, SG GRM has remained weak in 4Q’td, and marketing margins at ~INR9/INR5 per lit for MS/HSD remain robust and above our assumption (of INR3.3/lit). IOCL’s major refinery expansions are slated for commissioning in 2HFY26. IOCL is currently trading at 0.9x FY26E P/B, at par with its one-year forward LTA of 1x P/B.

Outlook

The stock trades at 11.9x consolidated FY26E EPS of INR10.4 and 0.9x FY26E P/B. We reiterate our BUY rating on the stock with a TP of INR145, valuing at 1x Dec’26E P/B.