Gandhar Oil Refinery Upgraded to Hold on Improved Technicals and Financial Performance

Quality Assessment: Financial Stability and Profitability

Gandhar Oil Refinery’s quality parameters have shown mixed signals over the longer term but recent quarterly results indicate a positive trajectory. The company reported its highest quarterly net sales of ₹1,167.06 crores in Q3 FY25-26, marking a significant increase compared to the previous four-quarter average. Profit before tax excluding other income (PBT LESS OI) surged by 44.2% to ₹41.56 crores, while net profit after tax (PAT) grew by 38.9% to ₹32.39 crores. These figures underscore an improving operational efficiency and profitability in the near term.

However, the long-term growth story remains subdued, with net sales declining at an annualised rate of -0.83% and operating profit contracting by -19.77% over the past five years. This contrast between recent quarterly strength and longer-term stagnation tempers the overall quality grade, which remains cautious but shows signs of stabilisation.

Valuation: Attractive Metrics Amidst Market Underperformance

From a valuation standpoint, Gandhar Oil Refinery presents an appealing case. The company’s return on capital employed (ROCE) stands at a respectable 10.6%, signalling efficient use of capital relative to peers. Its enterprise value to capital employed ratio is a modest 1.1, indicating the stock is trading at a discount compared to historical averages within the oil exploration and refinery sector.

Despite this, the stock has underperformed the broader market significantly over the last year, delivering a negative return of -15.12% against the BSE500’s positive 8.76% gain. This divergence is partly explained by the company’s subdued long-term growth and sector-specific challenges. The price-to-earnings-to-growth (PEG) ratio of 0.4 suggests the stock is undervalued relative to its earnings growth potential, providing a compelling entry point for investors willing to look beyond short-term price movements.

Financial Trend: Recent Quarterly Growth Counters Longer-Term Weakness

The financial trend for Gandhar Oil Refinery has improved markedly in the latest quarter, with key profitability metrics showing robust growth. The company’s PAT growth of 38.9% and PBT growth of 44.2% in Q3 FY25-26 are significant improvements over the previous four-quarter averages, signalling a potential turnaround in earnings momentum.

Nevertheless, the longer-term trend remains a concern. Over the past five years, the company’s net sales and operating profits have declined, reflecting structural challenges in the oil refining sector and competitive pressures. This dichotomy between short-term improvement and long-term decline has led to a cautious but optimistic outlook on the financial trend parameter.

Technical Analysis: Shift from Mildly Bearish to Sideways Trend

The most decisive factor behind the upgrade to Hold is the improvement in Gandhar Oil Refinery’s technical grade. The technical trend has shifted from mildly bearish to sideways, indicating a stabilisation in price action after a period of decline. Key technical indicators provide a nuanced picture:

• MACD: Weekly readings are mildly bullish, suggesting emerging upward momentum, although monthly signals remain inconclusive.


• RSI: Both weekly and monthly RSI show no clear signal, indicating neither overbought nor oversold conditions.


• Bollinger Bands: Weekly indicators are mildly bullish, but monthly bands remain bearish, reflecting mixed momentum across timeframes.


• Moving Averages: Daily averages are mildly bearish, consistent with recent price weakness.


• KST (Know Sure Thing): Weekly readings are bullish, supporting the case for a potential upward move.


• Dow Theory: Weekly shows no clear trend, while monthly is mildly bullish.


• On-Balance Volume (OBV): Weekly is neutral, but monthly OBV is bullish, indicating accumulation over the longer term.

These mixed but improving technical signals have prompted a reassessment of the stock’s near-term outlook, justifying the upgrade from Sell to Hold. The stock’s current price of ₹153.00 is below its previous close of ₹163.90 and well off its 52-week high of ₹185.25, but above the 52-week low of ₹120.60, suggesting a consolidation phase.

Comparative Performance: Underperformance Against Sensex and Sector

Gandhar Oil Refinery’s stock has underperformed the Sensex and broader market indices over the past year, with a -15.12% return compared to the Sensex’s 8.61% gain. Over shorter periods, however, the stock has shown resilience, posting a 2.17% gain over the past month versus a 3.74% decline in the Sensex. Year-to-date returns are slightly negative at -0.87%, but still outperform the Sensex’s -3.95% decline.

This relative strength in recent months, combined with improving technicals and solid quarterly earnings, supports the Hold rating. Investors should weigh the company’s recent operational improvements against its longer-term challenges and market underperformance.

Debt and Capital Structure: Low Leverage Supports Stability

Gandhar Oil Refinery maintains a conservative capital structure, with an average debt-to-equity ratio of just 0.10 times. This low leverage reduces financial risk and provides flexibility to navigate sector volatility. The company’s ability to generate returns on capital employed above 10% further enhances its financial stability and supports the Hold rating.

Outlook and Investment Implications

The upgrade to Hold reflects a balanced view of Gandhar Oil Refinery’s prospects. While the company faces headwinds from subdued long-term growth and recent market underperformance, its improving technical indicators, strong quarterly earnings growth, attractive valuation, and low leverage provide a foundation for cautious optimism.

Investors should monitor the company’s ability to sustain earnings momentum and translate technical improvements into a sustained uptrend. Given the current sideways technical trend and mixed signals from various indicators, a Hold rating is appropriate until clearer directional confirmation emerges.

In summary, Gandhar Oil Refinery’s upgrade from Sell to Hold is driven primarily by a shift in technical outlook from mildly bearish to sideways, supported by robust quarterly financial performance and attractive valuation metrics. The company’s low debt levels and improving profitability provide additional comfort, although longer-term growth challenges remain a concern.

Summary of Ratings and Scores

As of 27 Jan 2026, Gandhar Oil Refinery holds a Mojo Score of 54.0 with a Mojo Grade of Hold, upgraded from Sell. The Market Cap Grade stands at 3, reflecting its mid-cap status within the oil sector. Technical grades have improved notably, with weekly MACD and KST indicators turning bullish, while monthly signals remain mixed. The stock’s current price is ₹153.00, down 6.65% on the day, trading below its recent highs but above the yearly lows.

Investors should consider these factors in the context of sector dynamics and broader market conditions before making allocation decisions.

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