Goldman Sachs upgrades oil marketing cos, cites better outlook for next two fiscals

Mumbai: Goldman Sachs upgraded HPCL and BPCL to 'buy' and IOC to 'neutral' citing improvement in the outlook for these oil marketing companies (OMCs) in FY26 and FY27. The brokerage said that the OMC shares are down 25% from the peak in early 2024 due to pressure on earnings on account of lower crude discounts amid sanctions on Russia and the under-recovery in LPG (liquefied petroleum gas)

"However, these concerns appear largely priced in, and we believe the FY26/27 set up is improving for OMCs given crude oil price upside remains capped...and potential increase in Russia crude discount," said analysts at Goldman Sachs in a note. The brokerage anticipates Brent crude-a global benchmark for oil-to decline to the low $70 a barrel by year-end. Brent crude futures were trading at $75.4 a barrel on Wednesday.

A recovery in free cash flow in FY26 could be a key driver of OMCs' stock price performance that makes the risk-reward more attractive for HPCL and BPCL, said Goldman.


"We also upgrade IOC to 'neutral' from 'sell' as the stock has underperformed other OMCs by an average of 24% since reaching its peak early last year, leaving risk reward appearing more balanced," said the brokerage.