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Sharekhan’s research report on Hindustan Petroleum Corporation

Q3FY23 PAT of Rs. 172 crore surprised positively, beating our estimate of a net loss of Rs. 427 crore. This was largely led by strong gross marketing margin as GRM of $9.1/ bbl was below our estimate of $11/bbl. Blended derived gross marketing margins surged 214% q-o-q to Rs. 2,664/tonne; GRM of $9.1/bbl lagged that of BPCL/IOCL at $15.9/$12.9 per barrel. Refinery/pipeline throughput beat estimate at 4.8 mmt/5.8 mmt, up 7.6%/5.6% q-o-q while marketing sales volume of 11.3 mmt (up 8.3% q-o-q) was below our estimate of 11.8 mmt We believe that the earnings downgrade cycle is largely over for OMCs and expect earnings to normalise over FY24-25 led by strength in GRM and likely normalised auto fuel marketing margins. A spike in crude oil prices is a key risk to earnings recovery especially given OMCs inability to hike petrol/diesel price in an inflationary environment.


We maintain a Buy on HPCL with a revised PT of Rs. 265 given inexpensive valuations of 3.4x/0.8x FY24E EPS/BV and FY24E dividend yield of ~10%.

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Hindustan Petroleum Corporation - 09 -03 - 2023 - khan

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