Motilal Oswal sees higher Q3 profits for Oil & Gas cos; RIL, OMCs to lead

Motilal Oswal expects its coverage universe to report a 4 per cent Y-o-Y decline in sales in Q3FY26, while Ebitda and PAT are projected to grow 16 per cent and 25 per cent Y-o-Y

India’s oil and gas companies are likely to report a mixed set of earnings in the December 2025 quarter (Q3FY26), with profitability supported by refining margins and LPG compensation, even as lower crude prices and currency movements weigh on realisations, according to a report by Motilal Oswal Financial Services (MOFSL).

 

The brokerage expects its coverage universe to report a 4 per cent year-on-year (Y-o-Y) decline in sales in Q3FY26, while Ebitda and profit after tax (PAT) are projected to grow 16 per cent and 25 per cent Y-o-Y, respectively. Excluding oil marketing companies (OMCs), sales are estimated to rise 3 per cent Y-o-Y, with Ebitda also growing 3 per cent, while PAT may decline 2 per cent. Ebitda stands for interest, tax, depreciation, and amortisation.

 

 

For Reliance Industries (RIL), consolidated Ebitda is expected to increase 9 per cent Y-o-Y to ₹479 billion, supported by strong contributions from its telecom and retail businesses. Motilal Oswal estimates Ebitda to come in at ₹178 billion for Reliance Jio, up 15 per cent Y-o-Y, while retail Ebitda is seen rising 4 per cent Y-o-Y to ₹68 billion. Standalone Ebitda is projected at ₹161 billion, up 6 per cent Y-o-Y, with production meant for sale largely flat at 17.7 million metric tonnes. Standalone PAT is expected to grow 14 per cent Y-o-Y to ₹99 billion.

 

Among OMCs, analysts at Motilal Oswal expect standalone Ebitda for Hindustan Petroleum (HPCL), Bharat Petroleum (BPCL) and Indian Oil (IOCL) to increase 9–18 per cent quarter-on-quarter (Q-o-Q), on the back of stronger refining margins and the receipt of LPG compensation. Singapore gross refining margins (GRM) averaged $7.5 per barrel in Q3, up sharply from $3.8 per barrel in the previous quarter, driven by supply disruptions and improved product cracks. However, marketing margins for petrol and diesel declined 3 per cent and 8 per cent Q-o-Q, respectively, which may limit upside, the brokerage said in its note.

 

The brokerage prefers HPCL, citing its higher exposure to fuel marketing, reasonable valuation of 1.4 times FY27E price-to-book, and LPG compensation of ₹6.6 billion per month expected between November 2025 and October 2026. 

Analysts believe that lower LPG under-recoveries and the commissioning of new refining units will support earnings, even as it remains bearish on crude prices. It maintains a 'Buy' rating on HPCL.

 

In the city gas distribution (CGD) segment, Mahanagar Gas (MAHGL) and Indraprastha Gas (IGL) are expected to report volume growth of 12 per cent and 5 per cent Y-o-Y, respectively, while Gujarat Gas is likely to post a 10 per cent Y-o-Y decline due to competitive pressures. 

 

The correction in Brent crude prices and softer spot LNG prices are likely to support margins for IGL and Gujarat Gas on a sequential basis. However, MAHGL’s margins could remain under pressure due to its higher exposure to Henry Hub-linked LNG, with US gas prices rising sharply during the quarter.

 

Motilal Oswal has a 'Buy' rating on MAHGL with a target price of ₹1,700, valuing the stock at 15 times December 2027 earnings, and expects volumes to grow at an 11 per cent CAGR over FY25–28.

 

On the upstream front, ONGC and Oil India are expected to report largely flat production volumes both Y-o-Y and Q-o-Q, while realisations are likely to decline due to softer crude prices. 

 

The brokerage remains bearish on crude oil, noting that Brent prices fell $5.4 per barrel Q-o-Q to $63.6 per barrel in Q3FY26, as global supply growth outpaced demand. MOFSL expects oversupply to persist through CY25 and CY26 and maintains its Brent price forecast of $60 per barrel for FY27–28.

 

While refining margins saw a sharp rebound in Q3, the brokerage cautioned that the long-term outlook remains subdued, with global refining capacity additions expected to exceed demand growth over the next few years.  Disclaimer: The views or investment tips expressed by the brokerage in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.