Oil India stock surges 21% in one week as brokerages remain upbeat

Elara Capital maintained a 'Buy' rating on OIL with a target price of Rs 780 per share on higher FY26E EV/EBITDA assumption at 10.0x (from 7.0x), led by expectations of strong production growth.

Shares of Oil India (OIL) hit a new high at Rs 691.60, gaining nearly 4 per cent on the BSE in Tuesday’s intra-day trade; thus extending its past two-day rally after brokerages maintained a ‘Buy’ rating on the stock with a target price by up to Rs 780. In comparison, the BSE Sensex was down 0.81 per cent at 79,006 at 02:41 pm.

Meanwhile, global index provider - the MSCI on Tuesday in its latest index rejig for the month of August said it will add 7 stocks including OIL to its MSCI India Index, a part of the MSCI Global Standard Index. These adjustments will take place on August 30, 2024. According to a Nuvama report OIL will receive inflows of up to $ 144 million.

In the past one week, the stock price of OIL has appreciated by 21 per cent, as against 0.34 per cent decline in the BSE Sensex. Thus far in the calendar year 2024, the stock has zoomed 175 per cent, as compared to 9.3 per cent gain in the benchmark index.

Analysts at Elara Capital maintain ‘Buy’ rating on OIL with a target price of Rs 780 per share on higher FY26E EV/EBITDA assumption at 10.0x (from 7.0x), led by expectations of strong production growth in the next five years.

The company could double its gas production in the next 5-6 years, including existing plans to grow gas output by 50 per cent through FY24-26. OIL has plans to drill 100 wells in FY27 versus 78/81 in FY25/26 (38-61 in FY22-24) and build a gas pipeline to connect the stranded North Brahmaputra fields (3bcm capacity, equivalent to FY24 gas production). This implies that OIL is building gas infrastructure to support 100 per cent growth in gas production, the brokerage firm said.

Emkay Global Financial Services has set a target price of Rs 700 for OIL. Analysts at the brokerage firm hike FY25E-26E consolidated EPS by 6-7 per cent each, led by better core outlook. “We lift Sep-25E target price to Rs 700 (implying Sep-26E consolidated target P/E of 11.5x, from 10x) on likely gas pricing-led triggers and strong core,” the brokerage firm said. 

It retained its positive stance on OIL, on the back of growth in core production and stable operations at Numaligarh Refinery (NRL), amid the ongoing expansion (likely to drive FY27 earnings).

Analysts at Prabhudas Lilladher also maintained their ‘Buy’ rating on OIL with a target price of Rs 766 per share. On a conservative basis, the brokerage firm builds in 8 per cent and 16 per cent volume CAGR over FY24-26 to 3.9mmt of oil and 4.3bcm of gas, respectively, by FY26. Net oil realization at ~$ 75/bbl continues to remain at comfortable levels and gas realization would rise by $0.25/mmBtu to $6.75/mmBtu from April 1, 2025.