Jefferies upgrades state-run Indian Oil to 'buy'; sees over 31% potential gains

Shares of the oil marketing company Indian Oil Corporation (IOC) in Friday's trade (December 13) zoomed over 2 per cent to the day's high price of Rs 145 apiece on the BSE. The buying action in the scrip was seen after global brokerage Jefferies upgraded the stock from the earlier 'hold' call to 'buy'.

The brokerage also raised its price target from the earlier Rs 165 to Rs 185 per share, implying potential gains of 31 per cent from the previous close.

From its all-time high price of Rs 196.8 scaled on February 8, 2024, the stock is down over 28 per cent.

The global brokerage is of the view that refining at the state-run downstream oil refiner is set to strengthen in CY2025 given the accelerated capacity closures amidst healthy demand. Furthermore, Jefferies added that in case refining margins improve at the company it will be the biggest beneficiary due to its highest refining to marketing ratio.

Also, the brokerage noted that the risk-reward for the scrip has turned favourable.

The consensus recommendation on the stock from 32 analysts for Indian Oil Corporation is HOLD, shows Trendlyne data.

IOC Q2FY25 results

State-owned Indian Oil Corporation (IOC) reported a massive 98.6 per cent drop in net profit in the September quarter, as refinery margins fell and marketing margins shrunk. During the reporting quarter, the company's standalone net profit stood at  Rs 180.01 crore compared with a profit of Rs 12,967.32 crore a year back, according to a stock exchange filing by the company.

IOC share price performance

Indian Oil shares in the last one year have gained over 18 per cent, while its 3-year return is at 79 per cent. 

Indian Oil enjoys the highest refining to marketing volume ratio among its OMC peers, making it the largest beneficiary in case refining margins improve, Jefferies said, adding that refining is said to accelerate in 2025 due to accelerated capacity closures amidst healthy demand.

The brokerage also said that the recent correction in Indian Oil's stock price has turned favourable after a correction of nearly 20% in the last three months until November.

JEFFERIES ON INDIAN OIL (CMP: 141)
Double Upgrade from Hold to Buy, Target price increased to 185 from 165

Refining is set to strengthen in CY2025 on accelerated capacity closures amidst healthy demand
Co most levered to refining margin improvement owing to its highest refining/marketing ratio
Risk reward turned favourable

JEFFERIES ON INDIAN OIL (CMP: 141)
Double Upgrade from Hold to Buy, Target price increased to 185 from 165

Refining is set to strengthen in CY2025 on accelerated capacity closures amidst healthy demand
Co most levered to refining margin improvement owing to its highest refining/marketing ratio
Risk reward turned favourable