Buy HPCL; target of Rs 590: Motilal Oswal

Motilal Oswal's research report on HPCL

HPCL’s 2QFY26 EBITDA came in at INR76.2b (29% beat), aided by a higher-than estimated reported GRM of USD8.9/bbl (48% beat). GRM, adj. for inventory gains, stood at USD8/bbl. Marketing margin (including inv.) stood at ~INR5.8/lit (est. INR5.4/lit). The resultant PAT came in 29% above our estimate at INR38.3b. The MoP&NG, through letters dated 3rd and 24th Oct’25, approved a compensation of INR79.2b to HPCL for under-recoveries on the sale of domestic LPG up to 31st Mar’25 and those expected up to 31st Mar’26. The amount will be released in 12 equal monthly installments, with accruals recognized monthly starting Nov’25.

Outlook

HPCL currently trades at 1.4x FY27E P/B, which we believe offers a reasonable margin of safety as we estimate FY27E RoE of 19.9%. We value the stock at our SoTP-based TP of INR590. Reiterate BUY.