Oil Stocks to BUY: IOC, BPCL and HPCL are top picks of UBS—Check fresh targets

Oil Stocks to BUY: UBS has issued a positive outlook on India’s oil marketing companies, citing strong refining profitability supported by firm middle-distillate spreads. The global brokerage said current Singapore benchmark margins are not fully capturing the profitability enjoyed by diesel-heavy refiners.

UBS noted that India’s diversified crude sourcing continues to cushion the impact of global geopolitical shifts. The brokerage said this gives Indian refiners better stability compared to global peers.

UBS said it prefers IOC and BPCL over HPCL based on current valuations and margin visibility.

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Indian Oil Corporation (IOC): Maintain Buy

UBS has maintained a Buy rating on Indian Oil Corporation. The target price is Rs 190, while the stock is currently trading at Rs 169.

Bharat Petroleum Corporation (BPCL): Maintain Buy

UBS has also maintained a Buy rating on Bharat Petroleum Corporation. The target price is Rs 425, and the stock is currently at Rs 364.

Hindustan Petroleum Corporation (HPCL): Maintain Buy

UBS has kept a Buy rating on Hindustan Petroleum Corporation. The target price is Rs 540, while the stock is trading at Rs 477.

UBS expects refining margins to remain supportive in the near term, driven by strong middle-distillate demand and stable crude sourcing dynamics.

Nuvama view on OMCs

Nuvama, in its FYQ2 review report, said OMCs are likely to receive an LPG subsidy of Rs 300bn in 12 tranches from the government, compared with cumulative under-recoveries of about Rs 537bn at the end of Sep 2025. The equal monthly instalments are expected to begin from Nov 2025, with the receipts booked directly as revenue. However, Nuvama said under-recoveries may continue to rise as regional LPG prices usually see a seasonal uptick in the winter months, while the declared subsidy covers only 56 per cent of the existing cumulative under-recoveries.

The report added that OMC capex is likely to stay elevated due to long-gestation projects, which may pressure return ratios in the near term. It also said CGD multiples may de-rate because of uncertainty from ad-hoc government policy actions. On ONGC, Nuvama noted that the company’s production guidance appears optimistic, given it has missed expectations for the last seven years.