Emkay upgrades Oil India after Q1 results; stock jumps over 5%

Shares of Oil India surged over 5 percent to Rs 478.80 apiece on the BSE on Tuesday following a wave of bullish upgrades and reaffirmed positive views from prominent brokerages. The optimism comes on the heels of Oil India’s robust earnings for the first quarter of the current financial year, as the state-run company reported its highest-ever standalone quarterly profit.

Emkay Global took the lead among domestic brokerages by upgrading Oil India’s rating to Buy from Add, while maintaining a target price of Rs 575 per share. Elara Capital also reiterated its Buy rating, setting a higher target price of Rs 672, signalling a potential upside of 48 percent from current levels. International firms Nomura and Motilal Oswal maintained their neutral stances, pegging target prices at Rs 500 and Rs 485, respectively.

The surge in confidence was driven largely by Oil India's Q1FY27 results, which showed standalone profit after tax climbing to Rs 2,870 crore, up from Rs 813 crore in the same period last year - a 2.5-fold year-on-year growth. The company cited an 11 percent increase in crude oil production and a crude oil price realization of $98.73 per barrel as key factors. Its material subsidiary, Numaligarh Refinery Limited (NRL), also posted standout performance, with profit after tax reaching Rs 1,305 crore in Q1FY27 - 167 percent higher than the previous year. NRL reported a gross refining margin (GRM) of $35.95 per barrel and a distillate yield of 87.58 percent.

Emkay Global’s report highlighted that natural gas production is expected to benefit from relaxed evacuation constraints by the end of calendar year 2027, which should enable an additional 3.5-4 million metric standard cubic meters per day (mmscmd) in gas volumes from the first quarter of calendar year 2028. The expansion of NRL, anticipated to be completed by March 2027, would further add around 1.5 mmscmd by the third quarter of FY28. The brokerage noted that NRL maintained strong margins despite windfall taxes and lower excise duty, with expectations for utilisation to ramp up to 75 percent by the end of FY28. Oil India plans to drill 100 wells in FY27 and aims for a 10 percent annual increase in drilling activity, with a greater focus on deepwater opportunities. However, the brokerage cautioned that a sharper-than-expected decline in global crude prices, which it estimates at $85 and $80 a barrel for FY27 and FY28, remains a key downside risk.

Elara Capital concurred that crude oil remains Oil India’s primary earnings driver, with realisations up 49 percent year-on-year to $99 per barrel and output rising 11 percent to 0.95 million metric tonnes, slightly ahead of its forecasts. The firm sees potential upside if current production rates are sustained and expects future volume growth to be supported by both enhanced gas infrastructure and NRL’s capacity expansion.

Nomura, while retaining a neutral stance, slightly raised its earnings estimates, expecting a milder oil price environment in the medium to long term but projecting a higher NRL throughput as refining margins could remain strong longer than previously anticipated. Nomura also expects the Rs 10 per litre excise duty cut implemented in March 2026 to be rolled back by FY27 end, which could benefit NRL’s earnings from FY28 onwards.

Motilal Oswal noted Oil India’s previous challenges in ramping up production and sales, and cautioned that greater exploration intensity may result in higher dry-well write-offs, potentially impacting earnings. The brokerage expects that higher gas output from new wells may be offset by subdued gas prices, especially if crude continues to weaken.

Despite recent hurdles, brokerages found fresh optimism in Oil India's production guidance, infrastructure upgrades, and refining prospects, all of which could sustain the current growth momentum if market conditions remain supportive.