Oil India is a strong conviction BUY. Buy for target price of ₹720 (25% upside): Motilal Oswal

Valuations attractive; volume outlook strong

 Amid weak crude oil prices, the share price of Oil India (OINL) has declined 22% in the last 5 weeks. However, we reiterate our BUY rating on the stock and highlight the following: 1) we estimate that the Standalone (SA) business (adjusted for investments and Numaligarh refinery stake) trades at 7x FY27E P/E, which we believe is inexpensive; 2) OINL’s strong production growth outlook (9% CAGR over FY24-FY27) hedges against the risk of lower oil/gas prices; and 3) the capacity expansion for Indradhanush gas grid and Numaligarh refinery, remains in line with the guided schedule, and will be instrumental in unlocking value in FY26 and beyond.

 Lastly, even in the unlikely scenario of crude prices declining to USD60/bbl (and gas prices correcting to USD6/mmbtu), our target price will be INR563/share (2% downside at CMP), while the ROE will correct modestly from 15.6% (FY27E) to 11.5%. As such, we believe there is a limited downside for the stock from current levels.

CMP implies standalone business trading at 7x FY27E P/E

 We estimate that OINL’s Current Market Price (CMP), i.e. ~INR574/share, implies ~INR356/share for the standalone business. The standalone business, thus, trades at ~7x FY27E P/E.

 At CMP, the dividend yield is expected to stand at 2.9%/3.2% for FY26/FY27. Hence, OINL’s current valuations seem inexpensive.

Valuation and view

 Production growth guidance remained robust, with drilling activities and development wells in old areas contributing to this growth. Moreover, OINL is leveraging new technologies to increase production. The capacity expansion for NRL (from 3mmt to 9mmt) is expected to be completed by Dec’25, further driving growth for the company.

 OINL remains a strong conviction BUY at 1.5x FY27E P/B (standalone) valuation. It is a unique play to benefit from the strong multi-year uptrend in both upstream and refining. The stock currently trades at a P/E multiple of 10.3x FY27E EPS and 7.3x FY27E EV/EBITDA. We value the stock at 10x Dec’26E standalone adj. EPS and add investments to arrive at our TP of INR720. Reiterate BUY

Oil India is a strong conviction BUY Motilal Oswal