HPCL share price jumps 4% despite weak Q4 earnings; brokerages say ‘buy’ the stock, check target prices

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June 17, 2020 12:36 PM

HPCL stock price has risen nearly 30 per cent from its March low, however, it is still 34 per cent off from its 52-week high touched in October last year

HPCL, HPCL share price, HPCL stockWith today’s gain in the stock, the market capitalisation of HPCL stands at Rs 33,036.47 crore. The company also declared a final dividend of Rs 9.75 per equity

HPCL (Hindustan Petroleum Corporation Ltd) share price was up over 4 per cent at Rs 218.55 apiece on BSE even as the company on Tuesday said that its net profit for the January-March quarter plunged nearly 100 per cent due to inventory losses and fluctuation in global oil prices. With today’s gain in the stock, the market capitalisation of HPCL stands at Rs 33,036.47 crore. The company also declared a final dividend of Rs 9.75 per equity. Post Q4 earnings, research and brokerage firms are seeing buying opportunities in the stock, with an upside of 10 per cent. “While the Q4FY20 numbers have come in ahead of Street estimates, we believe that the Q1FY21 would be keenly watched by the markets given that demand would be adversely impacted for the better part of the quarter as compared to just about a week in Q4FY20,” said Jyoti Roy, DVP Equity Strategist, Angel Broking Ltd.

HPCL stock price has risen nearly 30 per cent from its March low, however, it is still 34 per cent off from its 52-week high touched in October last year. Motilal Oswal has given a ‘buy’ rating to the stock. “HPCL expects to go ahead with the same capex, with possible time extensions and cost escalations in a few cases,” Motilal Oswal said in its report. 

HPCL in a press release said that the last quarter of FY20 has seen unprecedented events like the outbreak of Covid-19 pandemic leading to nationwide lockdowns and demand contraction on the back of generally sluggish global economic activities. “Like witnessed in BPCL results, HPCL also reported strong core GRM (gross refining margin) but was offset by weak core marketing margin. This in our view could be due to the refinery transfer price (RTP) lag which has boosted core GRM but negatively impacted core marketing margin,” JM Financial said in its recent research report. The brokerage firm has maintained a ‘hold’ rating on the stock on account of the challenging GRM outlook in the medium term, with a 12-month target price of Rs 231, an upside of 10 per cent.

However, for the full year, HPCL posted a net profit of Rs 2,637 crore, a decline of 56.3 per cent from Rs 6,029 crore in the previous year. With an expectation of recovery in demand for petroleum products and refining margins, HDFC Securities has given ‘add’ rating to the stock with a price target of Rs 230, a 10 per cent upside from yesterday’s close. “Core GRM stood at USD 9.3/bbl vs USD 2.2/1.5 in 4QFY19/3QFY20. GRMs improved with higher naphtha, LPG cracks and fuel oil cracks. For FY20, crude throughput and core GRM stood at 17.2mmt (-6.8% YoY) and USD 4.2/bbl (vs. USD 4.6 in FY19),” HDFC Securities said in a report.

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