Motilal Oswal sees value in oil & gas, favors HPCL and GAIL, citing limited downgrade risks
Motilal Oswal, it names Hindustan Petroleum (HPCL) and GAIL as its top picks.
The report highlights that the sector is witnessing earnings resilience, aided by stable refining margins, favorable policy support, and improved gas transmission volumes.
Motilal Oswal further believes that there is a limited risk of sharp earnings downgrades due to multiple factors.
With valuations in several oil & gas stocks now at compelling levels, the brokerage highlights top investment picks that could offer strong upside potential. Here are the top picks:
HPCL: Buy| Target price: Rs 490
HPCL remains the top pick among oil marketing companies (OMCs), with projected marketing margins of Rs 3.3/liter for both MS and HSD in FY26/FY27, compared to the current Rs 9.1/liter for MS and Rs 6.6/liter for HSD. The stock's key growth drivers include the demerger and potential listing of its lubricant business, the commissioning of its bottom-upgrade unit in 4QFY25, the launch of its Rajasthan refinery in CY25, and LPG under-recovery compensation. Currently trading at 1.3x FY26E P/B, HPCL offers a strong margin of safety, supported by an estimated FY26E RoE of 17.3%. The HPCL’s target price values its standalone refining and marketing business at 6.5x Dec’26E EBITDA and factors in Rs 38 per share in potential value from the lubricant business demerger.
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