Motilal Oswal kept a bullish rating on Oil India. Shares of the oil producers were surging at the bourses on Thursday.

What The Brokerage Said: Oil India's shares have declined 22% in the last 5 weeks due to weak crude oil prices, the brokerage noted. Despite this, Motilal Oswal kept a "buy" call with a target price of ₹720, indicating an upside of 25% from the previous closing price.

According to the brokerage, the standalone business of Oil India which includes the company's investments and Numaligarh refinery stake trades at 7 times FY27 P/E, which the brokerage believes is an inexpensive price.

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Oil India's production growth outlook of 9% CAGR over FY24-27 is a hedge against the risk of lower oil and gas prices, the research firm added. Additionally, the capacity expansion of the Numaligarh refinery and Indradhanush gas grid is in line with the guided schedule and will be important in unlocking value after FY26, Motilal Oswal said.

The brokerage also points out that in the unlikely scenario where crude prices decline to $60/ barrel (bbl) and gas prices correctly to $6/mmbtu, the brokerage's target price will be ₹563 per share which has a 2% downside from the current market price and return on equity will correct from 15.6% to 11.5% in FY27. Motilal Oswal adds that it sees limited downside for the stock from the current levels.

Price Action: Shares of Oil India rose 3.42% to an intraday high of ₹594 on Thursday morning. 

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