HPCL, ONGC, GSPL only pockets of value in oil & gas sector: Motilal Oswal
HPCL, ONGC and Gujarat State Petronet (GSPL) are the only stocks with value in the Indian oil and gas sector, domestic brokerage firm Motilal Oswal stated in its report, noting that value trade has faded away in the sector.
Motilal Oswal maintained a ‘buy’ call on HPCL, ONGC and GSPL with target prices of Rs 400, Rs 340 and Rs 385 respectively.
Here is a detailed analysis of the preferred picks of the domestic brokerage firm:
HPCL
Analysts at Motilal Oswal stated that they now prefer HPCL over GAIL as they see a strong 25% volume growth, USD1.5-2/bbl margin expansion due to bottom upgrade project completion, and modest valuations as key catalysts.
“We see the following as key catalysts for the stock: 1) demerger and potential listing of
lubricant business, 2) the commissioning of its bottom upgrade unit, and 3) the
start of its Rajasthan refinery in 4QFY25,” said Abhishek Nigam, Research Analyst at Motilal Oswal.
HPCL currently trades at 1.2x FY26E P/B, which offers a reasonable margin of safety as we estimate FY26 ROE of 17.6%, it said.
ONGC
Despite an improving volume growth visibility, the investment case for ONGC is a tad more complicated today than it was a year ago, mainly due to risk of lower oil price in FY26. However, at 5.1x one-year fwd. P/E, valuations are still at a 30% discount to long-term average and we believe the value catch-up trade still has legs to run.
“While volume guidance is upbeat, execution will be key, and should the management achieve guided volumes, we see upside risk to
