Macquarie on Wednesday cut its earnings projections for several Indian oil and gas companies for fiscal year 2027, attributing the reductions to prevailing macro headwinds. The firm made only modest tweaks to its fiscal 2028 numbers and did not alter its recommendations, arguing that industry fundamentals should improve over the medium term.
Central to Macquarie's outlook is an assumption that crude oil and natural gas prices will fall in the second half of 2026 and remain lower through 2027. The broker said this outlook underpins its continued preference for Indian oil marketing companies (OMCs) even as it acknowledges short-term pressures.
On crude pricing, Macquarie set explicit forecasts for Brent: $68 per barrel in the second half of 2026 and $64 per barrel in 2027. The broker expects above-normal refining margins to sustain near-term profitability for OMCs, provided current excise duty reductions and retail pricing remain unchanged.
Macquarie reiterated the sensitivity of OMC earnings to crude input costs, noting that, all else equal, a $1 per barrel rise in crude would change EBITDA by roughly 5% to 6%. For the first quarter of fiscal 2027, the firm projects negative EBITDA across the major OMCs, estimating Indian Oil Corporation (IOC) at negative 218 billion rupees, Bharat Petroleum (BPCL) at negative 161 billion rupees, and Hindustan Petroleum (HPCL) at negative 146 billion rupees.
In the midstream space, Macquarie expects GAIL India to post sequential improvement in transmission volumes and stronger LPG segment earnings in the June quarter, while flagging that its petrochemicals operations remain loss-making. For Petronet LNG, the broker said roughly two-thirds of the Qatar LNG shortfall in the June quarter was covered by alternate supplies originating from the United States, Africa and Oman.
City gas distributors are seen delivering steady volume growth, though Macquarie projects sequential margin moderation in the June quarter. Between the two large distributors, the firm expects Mahanagar Gas to outpace Indraprastha Gas on medium-term volume growth, forecasting an 8% compound annual growth rate for Mahanagar Gas from fiscal 2026 to 2028 versus about 6% for Indraprastha Gas.
For Oil and Natural Gas Corporation (ONGC), Macquarie anticipates EBITDA will more than double quarter-over-quarter, driven by higher realizations despite the company recording lower production in the June quarter.
The cuts to fiscal 2027 earnings estimates were substantial across many names. Macquarie reduced its FY27 earnings forecasts for Hindustan Petroleum by 26%, Bharat Petroleum by 36%, and Indian Oil Corporation by 30%. Midstream names were marked down as well, with GAIL and Petronet LNG seeing reductions of 10% and 19% respectively. Among city gas distributors, Indraprastha Gas and Mahanagar Gas had FY27 estimates trimmed by 13% and 22%.
Following the earnings downgrades, Macquarie lowered target prices but retained its two-year forward multiples, signaling that the broker expects valuation metrics to revert once the anticipated price and demand dynamics materialize.
Impacted sectors: Oil marketing companies, midstream transmission and LNG importers, and city gas distribution networks are the primary sectors affected by these revisions.