The brokerage house ICICI Securities has raised the target price on the stock of Hindustan Petroleum to Rs 625 per equity share from Rs 555, earlier. The broking firm has maintained a “Buy” rating on the stock.
According to ICICI Securities, the company’s valuations are still at attractive levels and do not fully reflect the structural changes in scale and earnings profile of the company over the next three years.
Earlier, the Ministry of Petroleum and Natural Gas slashed Rs 2/litre on petrol and diesel across the country. This price cut will be borne completely by the oil marketing companies.
The brokerage is of the view that the company will have a gross margin of Rs3.2/liter and a net margin of Rs 1.7/liter for the financial year 2025. “…the combination of higher refining throughput (Vizag) along with the addition of petchem (Rajasthan) creates strong momentum for HPCL over the next 2-3 years,” said ICICI Securities.
Another broking firm, Antique Stock Broking said that the decision pulled down the gross retail marketing margin to Rs 2.8/liter from Rs 4.5/liter. However, the price correction will resume after the elections. Antique in a research report said that the OMCs will normalise margins over FY25/26 and they remain positive on the sector, with HPCL as the top pick among peers.
“However, we don’t expect the margin hit to be permanent and believe retail price revisions will resume post the elections as has been observed over the years. The yearly average marketing margins should stabilize notwithstanding the short-term volatility,” Antique said.