HPCL, MGL Tagged as Momentum Plays; ONGC, Oil India Downgraded by MOFSL

Why HPCL and MGL Are Momentum Plays

MOFSL categorised HPCL and MGL as momentum stocks driven by strong fundamentals and upcoming growth catalysts.

• HPCL is seen as the most attractive among OMCs, with key triggers including:

  • Marketing leverage in auto fuels

  • Planned demerger and listing of its lubricant business

  • Commissioning of its bottom upgrade unit by end-FY26

  • Rajasthan refinery start-up in FY26

• MGL is expected to post a 9% CAGR in volumes (FY25–27), supported by:

  • OEM tie-ups for CNG vehicle conversions

  • Attractive price discounts for new PNG customers

  • Rising demand in city gas distribution

Petronet LNG: The Value Play

While HPCL and MGL are momentum bets, Petronet LNG is seen as a value play. The stock currently trades at rock-bottom valuations of:

• 9x FY27E EPS

• 4.3% dividend yield

MOFSL set a DCF-based target price of ₹410, factoring in a conservative view on the company’s petchem capex and tariff structure, yet leaving room for significant upside potential.

Why ONGC and Oil India Were Downgraded

On the other hand, ONGC and Oil India were downgraded due to risks stemming from:

• Weakening oil demand in China, causing a global slowdown in growth

• IEA projections of robust supply growth (2.7 mb/d in 2025, 2.1 mb/d in 2026)

• Oversupply risks pressuring crude prices, which could fall below $65 per barrel

• Every $1/barrel decline in crude oil translating to a 2–4% cut in FY27 PAT estimates for upstream players

Sector Outlook: Four Key Themes to Watch

MOFSL outlined four major themes influencing its stance on the oil & gas sector:

1. China’s demand slowdown – A structural shift that may keep global demand weak.

2. Oversupply risks – Driven by strong supply growth projections.

3. Petrochemicals as demand driver – Emerging as the main growth segment, surpassing gasoline and gasoil.

4. Strong marketing margins – Auto fuel margins remain above assumptions, benefiting OMCs.

Conclusion

The oil & gas sector is at a turning point, with selective opportunities for investors. While upstream players face risks from falling crude prices and oversupply, downstream and CGD companies like HPCL, MGL, and Petronet LNG present strong growth and value opportunities. For investors, momentum lies in OMCs and CGDs, while caution is warranted on upstream majors.