OMCs set for strong quarter on buoyant margins, says Antique

Antique Stock Broking reiterated 'Buy' on Hindustan Petroleum Corp., Bharat Petroleum Corp., and Indian Oil Corp, with HPCL as the top pick

Oil marketing companies (OMCs) are poised to deliver another strong performance in the third quarter of the current financial year, supported by soft crude, resilient refining margins and a sharp reversal in losses on liquefied petroleum gas (LPG), according to Antique Stock Broking.

 

Refining is expected to remain the key earnings driver, aided by elevated product cracks stemming from reduced Russian exports, outages in the Middle East and firm global demand, the domestic brokerage said. It reiterated 'Buy' on Hindustan Petroleum Corp., Bharat Petroleum Corp., and Indian Oil Corp, with HPCL as the top pick.

 

LPG under-recoveries have narrowed significantly, from ₹98.6 per cylinder to ₹33 per cylinder, resulting in an estimated ₹3400 crore boost to Ebitda for the quarter. Additionally, the rollout of monthly compensation from November 2025 is likely to add another ₹5000 crore, taking the total uplift to about ₹8500 crore, or roughly 28 per cent of Q2 Ebitda, Antique said. 

 

Auto-fuel margins remain healthy at above ₹4 per litre despite a temporary dip in retail diesel margins. Antique expects these margins to rebound to over ₹5 per litre as product cracks cool from their current elevated levels, which are nearly 37 per cent above the three-year average.

 

While refining margins may ease through 2026 as new capacity comes onstream, Singapore complex margins are still likely to stay above $5 per barrel, with Indian refiners maintaining a premium of $1-1.5 per barrel. Crude supply remains ample, keeping benchmark prices in the $60-65 per barrel range.

 

"As long as crude stays range-bound and auto-fuel prices remain frozen, OMCs are well-positioned to sustain elevated profitability, whether driven by refining or marketing," Antique Stock Broking said. It added that sector valuations at 4.5-5.2 times first-half FY28 EV/Ebitda (adjusted for investments) remain compelling.

 

HPCL remains Antique’s top pick, with the commissioning of the Vizag refining upgrade facility this month likely to trigger earnings upgrades, the brokerage noted.

 

A near-term issue is the impact of recent US sanctions on Russian producers Rosneft and Lukoil, effective November 21. The move may temporarily disrupt supplies. Reliance Industries Ltd. has already halted Russian crude purchases for its SEZ refinery. However, Antique believes Russian exports are unlikely to be curbed meaningfully while global prices stay low, given geopolitical and market incentives.

 

Crude prices are therefore expected to remain in the $60-65 per barrel range in the near term, supported by healthy supplies from the US and OPEC+.  ================================== 

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