Gandhar Oil Refinery Upgraded to Hold as Technicals Improve Amid Mixed Financials

Technical Trends Shift to Neutral Territory

The most significant catalyst for the rating upgrade was the change in the technical grade from mildly bearish to sideways. This reflects a stabilisation in price momentum after a period of decline. Key technical indicators present a mixed but improving picture. The Moving Average Convergence Divergence (MACD) on the weekly chart is mildly bullish, signalling potential upward momentum, although the monthly MACD remains inconclusive.

The Relative Strength Index (RSI) on both weekly and monthly timeframes currently shows no clear signal, indicating neither overbought nor oversold conditions. Bollinger Bands on the weekly chart are bullish, suggesting price volatility is favouring upward moves, while the monthly bands remain mildly bearish, reflecting longer-term caution.

Other technical tools such as the Know Sure Thing (KST) indicator and Dow Theory on the weekly scale are mildly bullish, reinforcing the short-term positive momentum. Meanwhile, the On-Balance Volume (OBV) indicator is bullish on both weekly and monthly charts, signalling accumulation by investors. However, daily moving averages remain mildly bearish, indicating some near-term resistance.

Overall, the technical landscape has shifted from a negative bias to a more neutral or sideways trend, justifying the upgrade in technical grade and contributing to the overall rating improvement.

Financial Trend: Quarterly Performance Shows Strength

Gandhar Oil Refinery reported robust financial results for Q2 FY25-26, which have positively influenced the investment rating. The company achieved its highest quarterly net sales at ₹1,059.91 crores, accompanied by a peak PBDIT of ₹65.84 crores. Operating profit to interest coverage ratio reached an impressive 6.41 times, underscoring strong operational efficiency and manageable debt servicing costs.

Return on Capital Employed (ROCE) stands at a healthy 10.6%, reflecting effective utilisation of capital resources. The company’s low average debt-to-equity ratio of 0.10 times further supports financial stability and reduces risk exposure. These factors collectively indicate an improving financial trend, which has been factored into the revised Hold rating.

Valuation Remains Attractive Despite Market Headwinds

From a valuation perspective, Gandhar Oil Refinery is trading at a discount relative to its peers’ historical averages. The enterprise value to capital employed ratio is a modest 1.1, signalling that the stock is reasonably priced given its asset base and earnings potential. This valuation attractiveness is a key factor supporting the Hold rating, especially in light of the company’s improving operational metrics.

However, investors should note the stock’s recent price performance has been weak, with a one-year return of -27.54%, significantly underperforming the Sensex, which gained 9.06% over the same period. This underperformance reflects broader sector challenges and company-specific headwinds, including a five-year negative compound annual growth rate (CAGR) in net sales of -2.76% and operating profit decline of -21.51%. These longer-term trends temper enthusiasm and justify a cautious Hold rather than a more bullish rating.

Quality Assessment: Stable but Limited Growth Prospects

The company’s quality metrics present a mixed picture. While the low debt-to-equity ratio and strong interest coverage ratio indicate financial prudence and risk management, the lack of growth in sales and profits over the medium term raises concerns about the company’s ability to generate sustainable earnings expansion. Promoter shareholding remains majority, which can be a positive for governance stability but also limits liquidity and market float.

Given these factors, the quality grade remains moderate, supporting a Hold rating rather than an upgrade to Buy. Investors should monitor whether Gandhar Oil Refinery can reverse its declining sales and profit trends in coming quarters.

Market Performance and Price Action

On 1 Jan 2026, Gandhar Oil Refinery’s stock closed at ₹154.35, up 4.08% from the previous close of ₹148.30. The stock’s 52-week high and low stand at ₹222.80 and ₹120.60 respectively, indicating significant volatility over the past year. Short-term price action shows some recovery, with weekly returns of 4.57% outperforming the Sensex’s slight decline of 0.22% over the same period.

Despite this recent bounce, the stock’s year-to-date and one-year returns remain deeply negative at -27.54%, reflecting persistent challenges. The technical upgrade to a sideways trend suggests that the stock may be consolidating before a potential directional move, but investors should remain cautious given the mixed signals from monthly technical indicators.

Conclusion: Hold Rating Reflects Balanced Outlook

The upgrade of Gandhar Oil Refinery’s investment rating from Sell to Hold reflects a nuanced assessment of its current position. Improved technical indicators and a strong quarterly financial performance have alleviated some near-term concerns, while valuation metrics suggest the stock is reasonably priced relative to its capital employed and peers.

Nevertheless, the company’s long-term growth challenges and recent underperformance relative to the broader market warrant caution. Investors should view the Hold rating as a signal to maintain exposure without adding aggressively, awaiting clearer signs of sustained recovery in sales and profitability.

Monitoring upcoming quarterly results and technical developments will be crucial to reassessing the stock’s outlook. For now, Gandhar Oil Refinery offers a stabilising but not yet compelling investment case within the oil sector.

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