HPCL share price surges 5% as firm mulls buyback; should you buy?

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Updated: Oct 30, 2020 4:39 PM

With today's gain in the stock price, HPCL is up over 21.5 per cent from its 52-week low, taking the total market capitalisation of the firm to Rs 28,716 crore.

HPCLPNGRB gives out city gas licence to retail CNG to automobiles and piped cooking gas to households on the basis of committed work programme like laying of gas pipelines and setting up CNG dispensing stations.

Hindustan Petroleum Corporation Ltd (HPCL) share price jumped nearly 5 per cent to Rs 188.40 apiece on BSE, a day after the company informed that it will consider share buyback on November 4. With today’s gain in the stock price, HPCL is up over 21.5 per cent from its 52-week low, taking the total market capitalisation of the firm to Rs 28,716 crore. The board of directors of the company will meet on November 4 to consider financial results for the second quarter (July-September) and half year (April-September for 2020-21 fiscal). HPCL closed with 4.5% gains on Friday at 187.70 per share.

“The board will also consider a proposal to buy back the fully paid equity shares of the face value of Rs 10 each of the company,” HPCL said. According to PTI, the firm has no immediate history of a share buyback. Last week, HPCL had raised Rs 2,000 crore in debt for funding its capital expenditure during the current year. HPCL said that it has issued unsecured, redeemable, non-convertible, non-cumulative, taxable, debenture of Rs 10 lakh each aggregating to Rs 2,000 crores on private placement basis for funding of capital expenditure, including recoupment of expenditure already incurred.

Research and brokerage firm Emkay Global Financial Services has maintained a ‘buy’ rating to the stock with a target price of Rs 280, implying a 56 per cent upside. The brokerage firm continues to prefer OMCs including HPCL due to gradual recovery in marketing volumes and healthy marketing margins. It said that Q2FY21 saw an uptick in volumes across the board with HPCL up 2 per cent at 4.1 mmt.

Analysts at JM Financial said that OMCs are trading at near historical low valuations and at steep discounts to historical averages. “HPCL is trading at 0.7x FY22E P/B (vs. 3yr avg of 1.2x and 10yr avg of 1.0x),” the brokerage firm said. The firm has upgraded HPCL to ‘buy’ from ‘hold’ with a revised target price of Rs 235 from Rs 240. “HPCL is our preferred play in the OMC space given its relatively high exposure to the profitable marketing business (accounts for 60 per cent of its EBITDA vs. 30-40 per cent for other OMCs),” JM Financial said.

(The stock recommendations in this story are by the respective research and brokerage firm. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)

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