March 4, 2023
admin
HINDUSTAN PETROLEUM CORPORATION (HPCL), Capex to boost refining segment, going ahead…
Call & Research Report by ICICI Securities
Sector: Refineries
CMP Rs. 232, Target Rs. 275 (19% upside potential)
Target Period: 12 Months
Hindustan Petroleum Corporation (HPCL) is one of India’s largest public sector refining & marketing companies.
● The company operates more than 19000 retail outlets
● Petrol & diesel together historically contributed more than 60% of total sales
Q3FY23 Results: HPCL’s results were above our estimates on all fronts.
● Revenue was up 12% YoY, 1.7% QoQ to Rs 116126.6 crore (I-direct estimate: Rs 106283 crore). Product sales grew 10% YoY, 11% QoQ to 11 MMT
● Reported GRMs were at US$9.1/bbl while throughput was up 14% YoY, 7.6% QoQ to 4.83 MMT. As per our understanding, the marketing segment would have likely turned profitable, which was not seen with the other OMCs. EBITDA came in at Rs 1671.6 crore (I-direct estimate: Rs 533.6 crore)
● Hence, PAT for the quarter was at Rs 172.4 crore vs. a net Loss of Rs 2172 crore in the previous quarter (I-direct estimated net loss: Rs 439 crore)
What should investors do? GRMs are likely to remain range bound in the current quarter and marketing margins would be a key monitorable. HPCL’s refining capacity is expected to increase with expansion plans at its WOD Visakh refinery (from 8.3 MMTPA to 15 MMTPA) and a refinery cum petrochemical complex (9 MMTPA with a 74% stake) in Rajasthan.
● We change our rating on the stock from HOLD to BUY
Target Price and Valuation: We value HPCL at Rs 275 i.e. average of P/BV multiple: Rs 250/share (~1x P/BV on FY25E book value) and P/E multiple: Rs 300/share(~5x P/E on FY25E EPS).
Key triggers for future price performance:
● Crude throughput to improve with increased capacity getting commissioned
● Product cracks sustaining at higher level and passing on higher crude oil costs to customers
● Consistent dividend payout
To study next Research analysis.. Click
To Study our Small Cap Calls… Click
For Mutual Fund Guidance , Click chanakyaMFguidance.com