Shares of Chennai Petroleum Corporation Ltd (CPCL) and Mangalore Refinery and Petrochemicals Ltd (MRPL) rose up to 10% on June 23 as YES Securities sees valuation re-rating amid the Israel-Iran conflict.
"The outbreak of the Israel–Iran conflict has reshaped near-term oil and oil product fundamentals. A geopolitically charged environment, coupled with tight diesel and ATF markets, has materially boosted refining margins across Europe, the U.S., and Asia. The Indian refiners who have a higher distillate slate, sourcing flexibility, and improving utilization, are primed to monetize this margin cycle.
"We remain positive on Indian refining stocks with an upward bias to GRM assumptions for Q1FY26 and near term, expect the macro environment to remain supportive unless the conflict de-escalates materially and/or product inventories surge unexpectedly," said the brokerage firm.
At 3:15 pm on June 23, CPCL shares were trading 11% higher at Rs 702.55 while those of MRPL were trading 8.37% higher at Rs 146.17 apiece.
YES Securities said it prefers standalone refiners like CPCL and MRPL over the oil marketing companies as they have been witnessing a decline in the petrol and diesel gross marketing margins due to "an increase in refining product realization for petrol and diesel, rupee depreciation against the US dollar and unchanged fuel retail price (RSP) and persistent LPG burden".
"The Indian standalone refiners are poised to benefit meaningfully in Q1FY26 as global product cracks, especially diesel and ATF have surged following escalating geopolitical tensions in the Middle East. The diesel cracks have risen sharply breaching $20/bbl, driven by concerns over disruption to exports from the Gulf, and tightening inventories in the West. For players like CPCL and MRPL, this translates into strong GRM realization with limited offsetting factors. We estimate GRMs to improve materially QoQ, and with no marketing drag, these companies stand out as the purest plays on the current distillated upcycle and warrant a re-rating to higher valuation multiples," the brokerage added.
"Our top picks include CPCL > MRPL while amongst the OMCs, HPCL has a higher target price followed by BPCL. RIL could gain from higher GRMs in their O2C segment," said YES Securities.
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