India Oil and Gas: Prefer IOCL Among OMCs; CGDs' Valuation Cheap — OMCs' Integrated Margins Tracking in Positive After Price Hikes, Excise Duty Cuts, Oil Price Fall
Report Coverage
- Broker
- Nomura
- Region
- India / China / Middle East / Russia
- Sector
- Fossil Energy
- Report Type
- Industry Report
- Primary Focus
- India oil marketing company profitability and city gas distribution valuation amid elevated refining margins
Report Summary
Nomura prefers refiners in the oil and gas value chain, with IOCL as the top pick among OMCs given its robust refining margins and least exposure to marketing under-recoveries. Diesel and ATF cracks remain elevated at USD50/bbl and USD54/bbl due to refinery run-downs from the West Asia conflict. CGDs are trading at attractive valuations, with Mahanagar Gas and Gujarat Gas offering 35% and 30% potential upside respectively.
Key Takeaways
- Diesel and ATF cracks remain elevated at USD50/bbl and USD54/bbl vs pre-war run rate of USD15-20/bbl, driven by refinery run-downs from drone/missile attacks and lighter crude processing
- IOCL integrated margins estimated at USD8.3/bbl, the most favourable among OMCs, vs BPCL at USD6.8/bbl and HPCL at USD0.8/bbl
- OMCs saw sharp margin turnaround from combination of retail price hikes (cumulative INR7.35/litre for petrol), excise duty cuts and SAED on exports
- CGDs are attractively valued with Mahanagar Gas (35% upside) and Gujarat Gas (30% upside) as top picks; 1Q may be the margin bottom
- China's crude imports dropped 29% y/y in May to 8.1mbpd, lowest since Nov 2017, as Strait of Hormuz disruption chokes Middle East supply
Why This Report Matters
The West Asia conflict has created a structural tailwind for Indian refiners through elevated crack spreads, while CGDs offer deep value with improving margin visibility post price hikes.
Topics Covered
Companies Mentioned
Who this summary is for
This summary is for users researching the Nomura India Oil and Gas report. It helps users review India Oil and Gas: Prefer IOCL Among OMCs; CGDs' Valuation Cheap — OMCs' Integrated Margins Tracking in Positive After Price Hikes, Excise Duty Cuts, Oil Price Fall coverage, key takeaways, and related broker or sector research paths across India OMC integrated margin dynamics, refining crack spread post-conflict analysis, city gas distribution valuation opportunity; IOCL, BPCL.
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