On Friday, Jefferies, a global investment banking firm, raised its rating on Indian Oil Corp. (IOCL:IN) from Hold to Buy, while also increasing the price target from INR165.00 to INR185.00. The adjustment reflects a positive outlook on the company's potential performance in the coming year.
The upgrade is based on the anticipation of a stronger refining sector in CY2025, driven by an accelerated closure of capacities in the face of robust demand. Indian Oil Corp., as per Jefferies' analysis, is particularly well-positioned to benefit from improvements in refining margins due to its high refining to marketing ratio.
The firm notes that the risk-reward profile for Indian Oil Corp. has become more attractive following approximately a 20% decline in the company's stock price over the past three months. This recent correction has resulted in the stock trading at a significantly steeper discount to the Nifty index than its long-term average.
Jefferies' revised price target of INR185.00 is based on 1.3 times the forward price-to-book (P/B) ratio, which is expected to yield a 15% full-cycle return on equity (ROE) for the company. The firm's commentary indicates a strong belief in the company's financial prospects and its ability to deliver value to shareholders in the near future.
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