 "HDFC Securities trims Oil India target to ₹495; maintains 'Buy': Here's why")
Domestic brokerage HDFC Securities has lowered its target price for Oil India to ₹495 from ₹509, earlier, citing delays in the commissioning of Numaligarh Refinery's expanded capacity.
The brokerage now expects the refinery to begin operations in Q4FY26 with a gradual ramp-up thereafter, leading to cuts in FY26 and FY2 EPS estimates by 1.6 per cent and 9.1 per cent, respectively.
However, it has maintained its 'Buy' rating, supported by expectations of 9 per cent CAGR in gas production and 4 per cent CAGR in oil production over FY25-27E.
The target price implies a potential upside of 16.7 per cent from the December 31, 2025, closing price of ₹424.35 on the NSE.
Numaligarh Refinery (NRL) is in the process of expanding its refinery capacity from 3 million metric tonnes per annum (MMTPA) to 9 MMTPA. The expanded capacity, which was anticipated to be commissioned in a phased manner from December 2025, has seen delays and is yet to be completed. ALSO READ: Crude oil outlook for 2026 remains range-bound amid persistent supply glut
"We were confident of NRL achieving its stated target and hence expected the additional capacity to come online in December. However, given the delay in commissioning of the expanded refinery capacity, we now expect the capacity expansion to conclude by Q4FY26 and gradually ramp up in subsequent quarters," the brokerage said in its note.
HDFC Securities has trimmed its consolidated earnings per share (EPS) estimates for FY26/FY27 by 1.6 per cent/9.1 per cent, respectively.
According to analysts, as Brent crude oil prices have a direct impact on Oil India's crude oil realisation and profitability, a $1 per barrel decline in Brent crude oil prices could result in Oil India's standalone annual EPS declining by 2 per cent.
Similarly, any depreciation of the Indian rupee (INR) against the dollar is positive for Oil India’s earnings, as a ₹1 fall in the INR/USD rate could lift annual EPS by about 2.6 per cent.
A drop of around $5 per barrel (about 7 per cent) in average Brent crude prices over the past three months is likely to weigh on Oil India’s earnings, though the impact should be partly offset by a ₹1.7 (around 2 per cent) depreciation in the rupee during the same period, the brokerage said.
HDFC Securities slashed its FY26 and FY27 EPS estimates by 1.6 per cent and 9.1 per cent to ₹43.0 and ₹36.9, respectively. It values Oil India’s standalone business at ₹240 per share, based on 8x March 2027 EPS, and its investments at ₹255 per share, resulting in a target price of ₹495 per share.
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