Indian Oil Corporation reports healthy Q2 results; should you buy or sell?

Indian Oil Corporation (IOCL) reported its second quarter (Q2FY26) results on Monday, after market hours. At 9:30 AM, IOCl shares were trading 0.55 per cent higher at ₹156 per share. In comparison, BSE Sensex was up 0.04 per cent at 84,816.34.

IOCL Q2 results: Key highlights

• In Q2, IOCL’s consolidated net profit stood at ₹7,817.55 crore, as compared to a net loss of ₹169.58 crore a year ago. On a sequential basis, profit jumped 14.7 per cent from ₹6,813.71 crore.
• The company earned $19.6 on every barrel of crude oil it processed in Q2, compared to $2.15 gross refining margin in Q1 and $1.59 in Q2 last year. 
• The average GRM for April–September rose to $6.32 per barrel from $4.08 a year earlier, while the September-quarter margin stood at $10.6 per barrel.
• The refiner's revenue from operations for the quarter stood at ₹2.06 trillion, up 3.9 per cent year-on-year from ₹1.98 trillion. Sequentially, however, it dropped from ₹2.2 trillion.
• The company refined 17.609 million metric tons (MMT) of crude oil in Q2 FY26, compared with 16.738 MMT during the same period last year.

Brokerages’ view on IOCl post Q2

Nomura has maintained a ‘Buy’ call on IOCL shares with a target of ₹160 per share. The brokerage values IOCL's downstream business at 6.5x FY27F EV/Ebitda (Enterprise value to its earnings before interest, taxes, depreciation, and amortisation) and listed investments at a 30 per cent discount to the market price, and Lanka IOC at 6x FY27F P/E. 

 

According to Nomura, IOCL’s Q2FY26 Ebitda of ₹14,600 crore was 36 per cent above the Street’s estimate, reflecting a much better refining performance. Core refining margin of $8.9 per barrel was also above estimates at ₹6.3 per barrel and increased from $6.9 per barrel in Q1. 

 

Meanwhile, according to reports, Morgan Stanley has maintained an ‘Overweight’ rating with a target at ₹168 per share. 

 

The brokerage sees US sanctions on Russia as low risks and believes that earnings were supported by strong cracks and limited policy intervention with Brent between $65 to $70. 

 

On the other hand, JM Financial Institutional Securities has maintained ‘Reduce’, with a target of ₹145 per share on valuation grounds as it is trading at 0.97x FY27 price-to-book ratio, as compared to last three-year average of 0.9 times, however, it’s likely to see strong earnings growth over FY27-28 due to refining capacity expansion by 18 mmtpa or 25 per cent in the next 12 months, Nuvama noted. 

 

“We believe OMCs’ integrated refining cum marketing margin will normalise around historical levels as the government may retain the benefit of any sustained fall in crude price via excise duty hike and/or fuel price cut to pass on the benefit of lower crude price to end-consumers,” the brokerage said.