Buy HPCL; target of Rs 490: Motilal Oswal

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Motilal Oswal's research report on HPCL

HPCL’s reported 3QFY25 financial performance was significantly above our estimates, as weaker-than-expected marketing margin performance was overpowered by robust refining margins and marketing sale volumes. We estimate up to a USD1/bbl refining GRM impact should the Russian crude proportion in the crude oil mix decline to zero (not our base case). On a sequential basis, LPG prices have remained stable, and under-recoveries should start tapering off from 1QFY26 onwards. Further, marketing margins at ~INR9/INR5 per liter for MS/HSD remain robust and above our assumption (of INR3.3 per liter).

Outlook

Chhara Terminal at 1x P/B, and HPCL’s HRRL stake at 0.5x of HPCL’s equity investment in the project to date. MRPL’s stake is valued at MOFSL’s TP. All these lead to a revised TP of INR490. Reiterate BUY.

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