The Indian Oil Corporation (IOC) has recently unveiled impressive fourth-quarter results that have caught the attention of investors. Following this positive performance, Jefferies India Private Ltd has reaffirmed its optimistic outlook, assigning a Buy rating and a target price for IOC shares that suggests a notable upside. The analysis highlights several key factors contributing to this bullish sentiment.

Strong Operating Performance Drives Earnings

The fourth quarter showcased exceptional operational metrics, with IOC reporting earnings before interest, taxes, depreciation, and amortization (EBITDA) of approximately ₹13,500 crore. This figure reflects a significant year-over-year increase of 29% and a staggering 91% rise from the previous quarter. Remarkably, these earnings surpassed Jefferies’ projections by an impressive 81%.

• Earnings Highlights:
  • Q4 EBITDA: ₹13,500 crore
  • Year-over-year growth: 29%
  • Quarter-over-quarter growth: 91%

Marketing Margins Exceed Expectations

Despite facing a ₹5,600 crore loss in liquid petroleum gas (LPG), IOC’s marketing profitability for Q4 surpassed expectations. The average marketing margins for petrol and diesel stood at ₹5.9 and ₹9.6 per liter, respectively. With crude prices declining in the first quarter of FY26, these margins are poised for additional growth, although potential excise duty increases remain a concern.

• Marketing Margins Overview:
  • Petrol: ₹5.9 per liter
  • Diesel: ₹9.6 per liter
  • LPG Losses: ₹5,600 crore

Revised Margin Projections

In light of these developments, Jefferies has adjusted its margin estimates upward, maintaining a Buy rating for IOC. The firm has elevated its EBITDA forecasts for FY26 and FY27 by 15% and 17%, respectively. This revision reflects an optimistic view on marketing margins, particularly under favorable crude price conditions. Jefferies notes that with crude oil prices dropping by ₹10 per liter in April, there may be some inventory losses in the upcoming quarter, compounded by the lack of government compensation for LPG losses in FY25.

Target Price and Investment Risks

Jefferies has set a target price of ₹160 for IOC shares, representing 1.2 times the price-to-book value over one year. However, investors should be aware of certain risks, including fluctuations in crude oil prices and potential hikes in excise duty on automotive fuels.

As of the last trading session, IOC shares closed at approximately ₹137.25 on the NSE. This target price indicates an estimated upside of around 16% for investors considering an entry point into IOC stock.

Conclusion

With a robust quarterly performance and promising forecasts from Jefferies, Indian Oil Corporation is certainly a stock to watch. Investors should keep an eye on market dynamics, including crude prices and government policy changes, as these could significantly impact future profitability.