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We anticipate sequentially worse Q3 earnings from Reliance Industries, with poorer refining margins: According to PL, it predicts a 17.0 mmtpa refining throughput and a consecutive decline in Petchem profitability.
We anticipate sequentially worse Q3 earnings from Reliance Industries, with poorer refining margins: According to PL, it predicts a 17.0 mmtpa refining throughput and a consecutive decline in Petchem profitability.

In its Q3 preview report, brokerage Prabhudas Lilladher (PL) projects that the weak refining margins of oil marketing companies (OMCs) will be the primary cause of the operating profit for the oil and gas sector pack to decrease by 24% sequentially to Rs 86,100 crore. Ahead of the December quarter results being released, it has updated its target prices and ratings for a few shares.

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It stated that after windfall taxes, upstream firms like Oil & Natural Gas Corporation Ltd (ONGC) and Oil India Ltd are anticipated to sustain production levels and net crude realization of $75 per barrel. It also anticipates that gas realization will stay constant QoQ at $6.5 per MMBtu.

For OMCs, “Decrease in refining margins will lead to a decline in operating profitability: The average Singapore GRM for the quarter was $5.5 per barrel, down $4.1 QoQ amidst a decrease in product cracks. Inventory losses are expected to have an even greater effect on GRMs. We therefore expect operationally worse OMC results as a consequence of a significant decline in their refining margins. Despite the drop in benchmark, marketing margins have remained strong, with a GMM of Rs9.1/1.2/ltr on gasoline and diesel.

Reliance Industries Ltd. (RIL)

Reliance Industries Ltd. (RIL) is anticipated to have poorer QoQ results among upstream companies, with weaker refining margins. It predicts a 17.0 mmtpa refining throughput and a sequential decline in Petchem profitability.

The drop in Singapore GRM is projected to have an impact on refining margins as well. Jio should perform steadily, and the retail division should continue to be profitable. Maintain the “Accumulate” rating with a SOTP-based objective of Rs 2,718 as opposed to the previous Rs 2,618. Retail is valued at 39 times FY26 EV/Ebitda, Jio is valued at 15 times FY26 EV/Ebitda, and standalone businesses are valued at 7.5 times FY26 EV/Ebitda.

Based on five times FY26 EPS, PL reduced its rating for Oil India

Based on five times FY26 EPS, PL reduced its rating for Oil India from “Buy” to “Hold,” with a revised target of Rs 379 from Rs 368. It kept its “Buy” recommendation on ONGC and raised the target price to Rs 258 from Rs 237 previously, based on adding the value of investments and seven times FY26 EPS.
According to PL, operating profitability for city gas distributors may decrease gradually as spot LNG prices rise. On the heels of a recovery in Morbi volumes, it anticipates a 31% YoY volume gain in Gujarat. It stated that volumes of MGL and IGL are anticipated to increase by 7% and 9%, respectively

Based on 12 times FY26 EPS/10 times FY26 EPS, respectively, we reduced the recommendation on MGL and Petronet from Hold to “Reduce” with TP of Rs 1,065/Rs 208 (previously Rs 1,065/208). Additionally, we downgrade GSPL from ‘Buy’ to ‘Accumulate’ with a TP of Rs374 (previously Rs328) based on 7x FY26EPS adding the value of investments, and Gujarat Gas from ‘Accumulate’ to ‘Hold’ with a target of Rs 473 (before Rs 477) based on 24 times FY26EPS. Based on 13 times FY26 EPS, we retain our “Hold” rating on IGL with a target of Rs 416 (formerly Rs 406),” the statement stated.