The share price of Hindustan Petroleum is in focus. Motilal Oswal reiterated its Buy rating and kept a Rs 590 target price, indicating an upside of 31%. The brokerage report comes at a time when fuel marketing margins have stabilised, and the government has confirmed a sizeable LPG compensation package that begins this month. With the stock trading around Rs 450, the report argues that the market is still not fully recognising the improvement in HPCL’s earnings outlook.

HPCL is also approaching the commissioning stage for two long-delayed projects, the Rajasthan refinery and the residue upgrade unit in Vizag. These additions, combined with the monthly cash inflow linked to LPG under-recoveries, give the company stronger visibility over the next year. The brokerage believes this combination adds up to more strength than investors expect.

#1 – Motilal Oswal on HPCL: Target set at Rs 590

Motilal Oswal’s Buy call rests on eight reasons, led by the Rs 660 crore monthly LPG compensation that runs from November 2025 to October 2026. LPG under-recoveries have already dropped to Rs 30 to 40 a cylinder from earlier levels near Rs 135, which means the compensation directly supports profit instead of merely covering losses.

The brokerage also points out that HPCL depends more on fuel marketing than its peers. This matters because stable petrol and diesel margins typically benefit HPCL faster than others. The firm expects about 4% growth in marketing volumes as consumption remains strong across transport fuels.

ALSO READ

On the refining side, margins have turned favourable in recent weeks. Diesel and petrol cracks rose sharply in November due to temporary global refinery outages and supply disruptions tied to the Russia–Ukraine conflict. Even if these conditions ease later, they offer HPCL a short-term lift.

#2 – Motilal Oswal on HPCL: Marketing mix gives earnings more support

The report notes that HPCL’s revenue mix has tilted slightly towards marketing because LPG losses have become smaller and compensation is assured for a full year. This makes the company less vulnerable to sudden swings in crude oil prices.

ALSO READ

Because HPCL has more exposure to marketing than peers, steady margins can have a stronger impact on its earnings. The brokerage explains that this effect often becomes visible only when under-recoveries fall and policy support remains predictable, which is the case right now.

#3 – Motilal Oswal on HPCL: Refining projects close to commissioning

Two major projects are now in the final stages of preparation.

The Rajasthan refinery (HRRL) reached 89% physical progress by October. HPCL expects to feed crude into the unit by the end of December, with full ramp-up over the next three months. The refinery will have a high share of middle distillates, which generally command better spreads.

At Vizag, the Residue Upgradation Facility (RUF) finished its pre-commissioning cycle on 30 October. Catalyst loading is underway, and the company expects the unit to start contributing from February 2026. According to the report, this unit could improve overall gross refining margins by $2 to $3 a barrel once it stabilises.

Global refining conditions have also tightened in the near term. Outages, sanctions-related supply limits, and lower exports from Russia have lifted cracks across key products. While new global capacity could soften margins next year, the current environment gives HPCL an advantage.

#4 – Motilal Oswal on HPCL: Efficiency measures add another lever

HPCL rolled out Project Samriddhi in April 2025 with an aim to add Rs 1,000 crore to EBITDA in FY26. The company has already delivered Rs 820 crore in the first half of the year, with around a third of these savings expected to continue.

Motilal Oswal has not fully built these gains into its estimates, which leaves room for positive surprises. These efficiency improvements cover areas like fuel use, energy savings, and procurement areas where incremental gains can add up meaningfully, especially once the new projects come onstream.

#5 – Motilal Oswal on HPCL: Improved stability may shift sentiment

With LPG losses shrinking, compensation assured, refining margins firm and new projects nearing commissioning, HPCL’s operating environment looks far more stable than it did last year. Investor sentiment, which had weakened due to large swings in diesel cracks, is showing signs of improvement.

The company’s balance sheet is also expected to strengthen. Net debt-to-equity is forecast to fall to 0.9 in FY26 from 1.3 in FY25, and to 0.7 in FY27. The combination of higher operating cash flows and incoming compensation helps reduce leverage and interest costs.

Motilal Oswal stressed that its assumptions remain conservative. It is modelling a refining margin of $6.5 a barrel and a marketing margin of Rs 3.5 a litre, both of which sit below current levels. Any sustained improvement above these levels would add directly to earnings.

#6 – Motilal Oswal on HPCL: Financial outlook and valuation leave room for upside

The brokerage expects HPCL’s EBITDA to reach Rs 29,200 crore in FY26, with profit after tax projected at Rs 16,700 crore. Valuations remain below long-term averages, with the stock trading at 7.1 times FY27 earnings and 1.3 times book value, compared to its historical average of about 1.4 times.

Its sum-of-the-parts valuation of Rs 590 a share values the standalone refining business at 6.5 times EV/EBITDA, along with separate valuations for HRRL, MRPL, HMEL and the Chhara LNG terminal. The brokerage also noted that full benefits from RUF and HRRL have not been factored into the model.