Global brokerage Jefferies has reiterated a Buy on Bharat Petroleum Corporation (BPCL) with a target price of Rs 410, calling it its top pick among oil marketing companies.
The brokerage believes that BPCL offers better earnings visibility than Hindustan Petroleum (HPCL), even though the stock has slipped nearly 10% over the past year. It also has a Buy on Indian Oil Corporation (IOCL) with a target price of Rs 160, while keeping an Underperform rating on Hindustan Petroleum (HPCL) with a price target of Rs 340.
The brokerage in its report noted, “Prefer BPCL on strong earnings visibility and favorable valn. Maintain Buy, PT Rs 410 or 1.8x fwd P/B.”
Let’s look at the key reasons behind this call –
Jefferies top OMC pick: Why BPCL over HPCL?
BPCL’s stock has slipped nearly 10% over the past year, but Jefferies believes its earnings outlook remains strong. “BPCL trades at the same forward P/B as HPCL on concern of entering elevated capex phase,” the brokerage noted in its report, adding that the downside is limited given the stable crude outlook.
On HPCL, the brokerage is more cautious, highlighting earnings risk from its upcoming projects. “We note higher risk to HPCL’s earnings from 1) new projects that take 3-5 yrs to stabilize after commissioning and 2) any potential excise duty hike,” Jefferies said.
Jefferies top OMC pick: Oil prices support downstream earnings
One of the biggest factors in Jefferies call is the crude price trajectory. Oil has been under $70 a barrel since March, supported by higher OPEC+ supplies. This, combined with moderate demand growth, could create a surplus in late 2025.
“Benign crude price outlook is supportive of OMCs earnings over FY26E,” the brokerage noted.
Jefferies top OMC pick: Margins add to comfort
For now, refining and marketing economics are working in BPCL’s favour. Jefferies highlighted, “Marketing margins on diesel/petrol at Rs 8.1/11.2 per litre in YTDFY26 are tracking significantly ahead of normative levels.”
Even if excise duties rise, the brokerage believes that BPCL is better placed than HPCL, which would take a bigger hit.
Jefferies top OMC pick: Lessons from past refineries
The report also looked back at past refinery projects to explain why new projects drag on earnings.
“Our analysis of past greenfield capacity addition or complexity increase in OMCs show years of drag on earnings due to long period to stabilize operations,” the brokerage report added.
It pointed to BPCL’s Bina refinery and IOCL’s Paradip refinery, which both faced years of underperformance before stabilising. Similarly, BPCL’s Kochi refinery took three years to catch up on margins after its expansion.
At current valuations, Jefferies believes BPCL looks more attractive than HPCL, especially with strong earnings visibility and limited downside from crude. “BPCL’s current discount to Nifty of 55% on fwd P/B compares favorably with LT avg of 31%. We maintain Buy with PT Rs 410 at 1.8x Sep-26 P/B,” the brokerage added.