Shares of state-owned Hindustan Petroleum Corporation Ltd (HPCL) rose on Tuesday, July 30, despite the company reporting a significant decline in net profit due to slumping refinery margins and reduced marketing margins from fuel price cuts.
The stock of HPCL increased by 4.09% to Rs 396.65 on the NSE and by 4.12% to Rs 396.90 on the BSE in early trade, as analysts anticipate potential upside based on strong physical performance.
Brokerages on HPCL
Jefferies on HPCL
Jefferies has issued an underperform call on Hindustan Petroleum Corporation Ltd (HPCL) with a target price of Rs 315. The report notes that Q1 results revealed weak performance, with EBITDA down 56% quarter-over-quarter, although it was 21% above estimates.
The higher-than-expected EBITDA was attributed to marketing inventory gains, while refining performance was weaker.
Jefferies highlights that HPCL remains vulnerable with no changes to retail prices post-elections, and expects refining margins to remain rangebound, keeping integrated margins under pressure. The report maintains FY25 and FY26 estimates largely unchanged, citing an unfavorable risk-reward scenario following the stock’s steep rally.
CITI on HPCL
Citi has issued a buy call on Hindustan Petroleum Corporation Ltd (HPCL) with a target price of Rs 420. The report notes that Q1 EBITDA came in well below estimates. The gross refining margin (GRM) declined quarter-over-quarter from $7 per barrel to $5 per barrel, slightly exceeding Citi’s estimate of $4.5 per barrel.
The shortfall was primarily due to an LPG under-recovery of Rs 250 crore. Net income for the quarter was Rs 360 crore, down 87% quarter-over-quarter, and significantly below the estimated Rs 890 crore.
Citi highlights that the government has yet to announce any budgetary compensation for LPG, though it could be announced later in the year. Such compensation would help oil marketing companies reverse these under-recoveries.
JP Morgan on HPCL
JP Morgan has maintained a neutral rating on Hindustan Petroleum Corporation Ltd (HPCL) with a target price of Rs 335. The report highlights a weak Q1 profit after tax (PAT), which was 73% below JP Morgan’s estimates.
The moderate miss on gross profits led to a sharp bottom-line miss, attributed to the company’s higher-than-peers P&L leverage. JP Morgan notes that higher operating leverage could lead to earnings surprises if oil prices fall and retail prices remain stagnant.
UBS on HPCL
UBS has issued a buy rating on Hindustan Petroleum Corporation Ltd (HPCL) with a target price of Rs 445. The report notes that Q1 earnings were impacted by LPG under-recoveries and low distillate yield. Despite this, HPCL showed strong physical performance, with earnings exceeding UBS’s expectations.
The gross refining margin (GRM) was in line at $5 per barrel, though distillate yield lagged. The report highlights that earnings were affected by Rs 25 billion in LPG under-recoveries for the quarter.
Stock Performance on HPCL
In terms of stock performance, HPCL shares have demonstrated positive returns across multiple time frames. Over the past month, the stock has given a commendable 20.27% return, showcasing its stability and growth potential. The last six months have seen even more impressive results, with a substantial increase of 26.82%, indicating a strong upward trend.
Year-to-date, HPCL shares have surged by 49.64%, reinforcing the stock’s positive momentum in the current fiscal year. Looking at the broader picture, the stock has delivered an impressive return of over 111.77% in the last twelve months, emphasizing its sustained growth and attractiveness to investors.
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