BofA-Indian Oil Corporation Limited 1QFY26：EBITDA miss on inventory loss；Russian crude discounts...-20250819

1Q: EBITDA miss on inventory loss

Indian Oil’s (IOCL) reported standalone 1Q’FY26 EBITDA at INR126bn (+46% YoY, -7%QoQ) came in 19% below Bloomberg consensus. The miss was driven by (i) lower-than-expected reported GRM (US$2.15/bbl vs US$7.9/bbl in 4Q) mainly on refining inventoryloss, (ii) marketing inventory loss (total inventory losses: INR65bn). Adjusted GRMimproved to US$6.9/bbl (vs US$5.4/bbl in 4Q) mainly on improved product cracks. Weraise our FY26E EBITDA by 28% and PO to INR165/sh (vs prior INR160/sh) given therecently announced LPG compensation (see report: Oil & Gas - India: INR300bncompensation eases LPG margin strain for OMCs). Reiterate Neutral rating on balancedrisk-reward.

Russian crude discounts narrow to US$1.5/bbl

Key conference call highlights: (i) Refining: Russian crude constituted 24% of total crudeprocessed in 1Q (vs 22% in FY25) with discounts narrowing to US$1.5/bbl. Economicconsiderations will determine company’s Russian crude sourcing strategy; (ii) Marketing:IOCL plans to add more than 4,000 retail outlets (ROs) in FY26 (445 ROs added in 1Q)with company targeting total ROs of 48,000 by FY27-end (40,666 as of Jun’25); (iii)Petchem: Overall spreads marginally improved QoQ, though continue to remainsuppressed. Management expects the cycle to turn by the time the company’s newcapacities come online – IOCL is looking to increase its petrochemical intensity to 15%by 2030 (vs 6% currently); (iv) Ennore LNG terminal: The company expects a capacityutilization of 31-32% in FY26 (vs 18%/25% in FY24/FY25) with further improvementlikely in FY27.