Indian Oil Q4 FY26 earnings beat estimates despite FY27 margin and throughput headwinds
Indian Oil Corporation Ltd.
Accumulate
₹135
₹132
₹145
7.41%
Investment View and Valuation
PL Research retains an Accumulate rating on Indian Oil Corporation (IOCL) while reducing its target price to Rs 145 from Rs 163. The report highlights a strong Q4 FY26 operating and earnings beat but expects Q1 FY27 to remain challenging amid West Asia-related volatility, fuel under-recoveries and planned refinery shutdowns.
PL Research reduced its valuation multiple to 0.8x FY28E from 0.9x, citing current weakness. FY27E EBITDA and EPS estimates were cut by 30.4 per cent and 45.9 per cent, respectively, while FY28E EBITDA and EPS estimates were raised by 2.9 per cent and 9.4 per cent.
Q4 FY26 Financial Performance
Indian Oil's standalone Q4 FY26 revenue was Rs 2,078.8 billion, up 1.7 per cent quarter-on-quarter and 6.6 per cent year-on-year, although it was 5.4 per cent below PL Research's estimate. EBITDA rose 6.2 per cent quarter-on-quarter and 64.9 per cent year-on-year to Rs 226.1 billion, materially above PL Research's estimate of Rs 161.4 billion and Bloomberg consensus of Rs 146.5 billion.
EBITDA margin expanded to 10.9 per cent from 10.4 per cent in Q3 FY26 and 7.0 per cent in Q4 FY25. Reported PAT was Rs 113.8 billion, down 6.2 per cent sequentially but up 56.6 per cent year-on-year. PAT exceeded PL Research's forecast of Rs 86.4 billion and Bloomberg consensus of Rs 85.4 billion.
The stronger performance reflected higher cracks alongside stable gross marketing margin in January 2026 and February 2026. An expected inventory gain from rising crude prices in March 2026 also contributed.
| Standalone metric | Q4 FY26 | Quarter-on-quarter change | Year-on-year change |
|---|---|---|---|
| Revenue | Rs 2,078.8 billion | 1.7% | 6.6% |
| EBITDA | Rs 226.1 billion | 6.2% | 64.9% |
| EBITDA margin | 10.9% | 10.4% in Q3 FY26 | 7.0% in Q4 FY25 |
| Reported PAT | Rs 113.8 billion | -6.2% | 56.6% |
Operating Performance
Q4 FY26 refining throughput increased to 19.7 million metric tonnes from 19.4 million metric tonnes in Q3 FY26 and 18.5 million metric tonnes in Q4 FY25. Domestic refined-product sales reached 23.3 million metric tonnes, up 0.7 per cent sequentially and 6.4 per cent year-on-year.
Integrated margin was Rs 12.6 per litre, compared with Rs 10.7 per litre in Q3 FY26 and Rs 8.9 per litre a year earlier. Management did not disclose Q4 FY26 or FY26 gross refining margins because of heightened volatility arising from disruptions in West Asia.
FY26 refinery utilisation was strong at 107 per cent, while total product sales volume rose 5 per cent year-on-year to 105 million metric tonnes. Indian Oil also exported LNG to Nepal for the first time in FY26.
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FY26 Results and LPG Under-Recoveries
For FY26, standalone EBITDA more than doubled to Rs 711.0 billion and PAT increased more than two times to Rs 368.0 billion. Indian Oil received Rs 36.2 billion of LPG compensation in Q4 FY26.
However, LPG under-recovery was Rs 100 per cylinder in Q4 FY26, Rs 171 per cylinder in April 2026 and increased sharply to Rs 617 per cylinder in May 2026. The LPG buffer stood at Rs 232 billion, while FY26 LPG under-recovery was Rs 92.1 billion.
Management stated that the Rs 3.9 per litre price hikes implemented in May 2026 provide some relief but may not fully offset under-recoveries in motor spirit and high-speed diesel if West Asia disruptions persist.
FY27 Capital Expenditure and Capacity Expansion
Management guided FY27 capital expenditure of Rs 327 billion, with around 50 per cent allocated to refining and pipeline projects and Rs 50 billion earmarked for renewables. Planned refinery shutdowns are expected to restrict FY27 throughput to about 75 million metric tonnes.
Expansion projects are progressing at Panipat, Gujarat and Barauni. Management's ramp-up assumption is 60 per cent utilisation in year one, 80 per cent in year two and 100 per cent in year three.
| Refinery | Current capacity | Expanded capacity | Expected completion |
|---|---|---|---|
| Panipat | 15 million metric tonnes per annum | 25 million metric tonnes per annum | December 2026 |
| Gujarat | 13.7 million metric tonnes per annum | 18 million metric tonnes per annum | November 2026 to December 2026 |
| Barauni | 6 million metric tonnes per annum | 9 million metric tonnes per annum | August 2026 |
PL Research Forecasts
PL Research forecasts consolidated FY27E revenue of Rs 8,899 billion, EBITDA of Rs 378 billion and PAT of Rs 137 billion. For FY28E, it projects revenue of Rs 9,830 billion, EBITDA of Rs 567 billion and PAT of Rs 273 billion.
| Metric | FY27E | FY28E |
|---|---|---|
| Revenue | Rs 8,899 billion | Rs 9,830 billion |
| EBITDA | Rs 378 billion | Rs 567 billion |
| PAT | Rs 137 billion | Rs 273 billion |
| Refining throughput | 82 million metric tonnes | 97 million metric tonnes |
| Integrated margin | Rs 7 per litre | Rs 9 per litre |
Key Near-Term Risks
- Persistent volatility related to disruptions in West Asia.
- Fuel under-recoveries, particularly in LPG, motor spirit and high-speed diesel.
- Uncertainty over gross refining margins.
- The impact of planned refinery shutdowns on FY27 throughput.
Disclaimer: This is a summary of a research report published by the broker/research house identified above. The views, recommendations, target prices and estimates are those of the respective broker and do not represent DSIJ investment advice. The summary may be AI-assisted, hence please refer to the original report for complete details, disclosures and risks.
