Shares of Hindustan Petroleum Corporation Limited (HPCL) rallied nearly 3.5 percent on November 7 as the oil refining and marketing PSU swung to a stellar net profit in Q2 FY24 on the back of lower crude prices. At 11:37am, the stock was trading at Rs 271.90 on the NSE.
HPCL on November 6 reported a consolidated net profit of Rs 5,826.96 crore for the second quarter of 2023-24, turning into green from Rs 2,476 crore in the red a year back because of record-high crude oil prices.
HPCL beat Bloomberg estimates of Rs 2,990 crore net profit the second quarter. Healthier marketing margins from last year helped the company book profits in the quarter.
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Brokerage views, target prices
Jefferies has given HPCL an 'underperform' rating with a target price of Rs 225 per share in a report released after the results. “In the third quarter of FY24, HPCL's EBITDA performed better than expected, thanks to higher gains from inventory, despite weaker refining margins. The refining margins dropped significantly in Q3, reducing marketing losses,” it said.
However, Jefferies anticipates lower earnings in the second half of FY24 due to ongoing marketing losses in diesel and a compressed Gross Refining Margin (GRM). The upcoming elections may hinder any potential hike in retail fuel prices. Despite this, Jefferies raised their FY24 EBITDA outlook based on a stronger H1FY24 performance.
Brokerage firm Motilal Oswal's recent research report has assigned a 'neutral' rating for HPCL, with a target price of Rs 265.
HPCL Stock Performance
The HPCL stock has given a return of 3.05 percent over the last six months. The benchmark Nifty50 index has given a return of 6.28 percent over the same duration.
Financial results
HPCL’s net profit declined 14 percent sequentially, as it posted a profit of Rs 6,765.50 in the June quarter. Profit slipped in Q2 from the last quarter as crude oil prices gained momentum since July amid supply cuts and geopolitical tensions. Brent crude oil averaged about $87 per barrel in the July-September quarter, a gain of 11 percent from the first quarter, brokerage Motilal Oswal said.
In Q2, earnings before interest, tax, depreciation and amortisation (EBITDA) fell 15 percent from last quarter at Rs 9,280.36 crore, as against Rs 10,944.82 crore in Q1FY24.
Also Read: HPCL swings back to profit on-year at Rs 5,827 crore in Q2 amid lower crude prices
Its revenue declined almost 10 percent to Rs 1.02 lakh crore, compared to Rs 1.13 lakh crore in the same period last year.
HPCL’s average gross refining margin (GRM) for the first half of FY24 was $10.49 per barrel, as against $12.62 during the corresponding period last year, the company said in a stock exchange filing. The company’s throughput was 5.75 million metric tonne (MMT) during the quarter, compared to 4.49 MMT last year.
On the marketing front, HPCL achieved quarterly total sales volume (including exports) of 10.74 MMT during July-September 2023 from 10.39 MMT in last year, representing a growth of 3.4 percent, the company said in a press release. HPCL commissioned 189 retail outlets across the country during the quarter taking the total number to 21,431 retail outlets.
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