Chennai Petroleum posts strong Q2; analysts upbeat on GRM, earnings outlook

Chennai Petroleum posted PAT of ₹732 crore in Q2FY26 against a loss of ₹629 crore in Q2FY25, on account of higher GRM at USD 9.1/bbl

Chennai Petroleum Corporation reported a strong performance in the quarter ended September 30, 2025 (Q2FY26), driven by better operational activity and gross refining margins (GRM). Domestic brokerage Elara Securities has upgraded the stock to 'Buy' from 'Reduce', while YES Securities also assigned a 'Buy' rating to the stock. 

 

At 01:15 PM, the Chennai Petroleum stock was trading at ₹824, up 7 per cent on the NSE. In comparison, the NSE Nifty50 was quoting at 25,927 levels, down 40 points or 0.15 per cent. The stock's 52-week high was at ₹858.85 and 52-week low was at ₹433.10 on the NSE. The company's total market capitalisation stood at ₹12,288 crore.

 

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Elara Securities - GRM growth drives earnings

Analysts at Elara Securities noted that the company posted profit after tax of ₹732 crore in Q2FY26 against a loss of ₹629 crore in the corresponding quarter of the previous fiscal, on account of higher GRM at USD 9.1/bbl versus negative GRM of USD 1.7/bbl in Q2FY25 and a 44 per cent year-on-year (Y-o-Y) rise in crude throughput. 

 

Middle or light distillate cracks rose Y-o-Y as diesel, jet fuel, and gasoline cracks improved 23 to 37 per cent on low inventories, and given reduced Chinese exports and supply disruption. Sequentially, gasoline cracks declined 15 per cent, while diesel and jet fuel cracks rose 18 per cent and 13 per cent, respectively. 

 

According to Elara Securities, the share of discounted Russian crude in the company’s total crude basket was around 19 per cent in Q2FY26, up from 14 per cent in Q1FY26 but lower than 22 per cent in Q2FY25 (based on Bloomberg data). With US sanctions on Russian firms and Europe banning refined products from Russian crude, the availability of such crude may decrease. However, any potential disruptions in refined product supply could help maintain elevated gross refining margins (GRMs).

YES Securities - Strong performance on better operational activity and GRMs

According to YES Securities, Chennai Petroleum’s refinery throughput reached 3.013 million metric tonnes, operating at about 114 per cent capacity (compared with 113 per cent in the previous quarter and 79 per cent a year ago), exceeding expectations despite a 10-day shutdown in one phase at the end of September 2025. The shutdown extended for another 15 days in early Q3, but the refinery has now returned to normal, with no major impact expected on Q3 utilisation.

 

Operating expenses remained largely stable at USD 2.8 per barrel, in line with the trailing eight-quarter average of USD 2.9 per barrel. RLNG consumption was around 1.6 mmscmd, unchanged from the previous quarter. The quarter may have seen a forex loss of roughly ₹1 billion, the brokerage said in a note.

 

Leverage improved both sequentially and Y-o-Y, with debt falling ₹2,060 crore Q-o-Q to ₹1,880 crore (down from a peak of ₹10,400 crore) and ₹4,180 crore YoY. Capex for the quarter stood at ₹96 crore (H1FY26: ₹175 crore), with a full-year target of ₹700 crore.

Chennai Petroleum Corporation outlook

Elara Securities has upgraded Chennai Petroleum to 'Buy', raising its target price to ₹935 on expectations of improved GRMs in the coming quarters amid potential middle distillates shortages in the EU, and revising FY26–28 Ebitda estimates by 70 per cent/5 per cent/8 per cent. The target assumes a FY27E GRM of USD 6.5/bbl and a one-year forward EV/EBITDA of 6.0x. 

 

YES Securities assigned a FY27 P/BV multiple of 1.6x, arriving at a target of ₹1,100 per share, while noting maintenance capex of ₹250–300 crore per year and total annual capex of ₹700–800 crore.