Global brokerages raise target price on few oil & gas stocks; expect strong performance ahead

Citi has also increased its target price on Gujarat Gas, Indraprastha Gas, and Mahanagar Gas.

Representative image. Source: Reuters

Morgan Staley believes that India's gas stocks offer some of the best growth opportunities as the country's gas pipeline network has doubled, which will help gas producers and city gas players in volume growth. Expecting healthy growth, the brokerage has raised the target price on ONGC, GAIL, and Oil India and picked GAIL, OIL, and ONGC along with Gujarat Gas as top choices.

Stocks	Rating	New Target	Old Target
ONGC	Overweight	Rs 254	Rs 216
GAIL	Overweight	Rs 195	Rs 151
Petronet LNG	Equalweight	Rs 219	Rs 235
Oil India	Overweight	Rs 487	Rs 329
GSPL	Underweight	Rs 262	Rs 265
Gujarat Gas	Overweight	Rs 579	Rs 505
Indraprastha Gas	Equalweight	Rs 413	Rs 432

Meanwhile, Jefferies sees a range-bound profitability for the oil-to-chemicals (O2C) segment of Reliance Industries (RIL) in FY25 and forecasts 13 per cent consolidated growth in earnings before tax, interest, depreciation, and amortisation (EBITDA), driven by a hike in Jio tariff. The brokerage has downgraded GAIL due to its rich valuation and instead prefers MGL.

The brokerage has raised its targets on Gujarat Gas, Petronet LNG, Indraprastha Gas, Mahanagar Gas, HPCL, IOCL, and BPCL

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Stocks	Rating	New Target	Old Target
Petronet LNG	Underperform	Rs 195	Rs 180
Gujarat Gas	Underperform	Rs 385	Rs 370
Indraprastha Gas	Hold	Rs 430	Rs 420
Mahanagar Gas	Buy	Rs 1,450	Rs 1,350
HPCL	Underperform	Rs 330	Rs 225
BPCL	Underperform	Rs 405	Rs 300
IOCL	Hold	Rs 130	Rs 90

Citi has also increased its target price on Gujarat Gas, Indraprastha Gas, and Mahanagar Gas.

Stocks	New Rating	New Target	Old Target
Gujarat Gas	Sell	Rs 425	Rs 390
Indraprastha Gas	Buy	Rs 510	Rs 470
Mahanagar Gas	Buy	Rs 1,390	Rs 1,250

How are oil and gas companies expected to fare in Q3?

According to domestic brokerage Anand Rathi, after a record H1FY24, third quarter trends suggest another relatively convincing performance by oil marketing companies (OMCs), despite being hit by inventory losses and lower gross refining margins (GRMs).

Further, strong non-OPEC supply of 1.6 million b/d for CY24 is likely to be ahead of demand of 0.9 million, thereby keeping oil prices subdued and supporting strong performances by OMCs.

The brokerage has raised its FY25 and FY26 estimates on the back of geopolitical tension, and the subsequent ban on European Union (EU) imports of Russian crude has led to supplies being diverted to China and India.

"We expect the continued availability of discounted Russian crude to support GRMs and increase our FY25e/FY26e refining assumptions by $1.3-2.7/bbl and earnings by 6-145 per cent," the report read.

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