Prabhudas Lilladher's research report on Hindustan Petroleum Corporation
We upgrade the company from ‘Sell’ to ‘Accumulate’ post correction in stock price. Hindustan Petroleum Corporation (HPCL) reported lower-than-expected Q2 results with EBITDA of Rs27.2bn (up 29.3% QoQ; PLe: Rs37.2bn, BBGe: Rs42bn) and PAT of Rs6.3bn (up 77.4% QoQ; PLe: Rs13.9bn, BBGe: Rs18.4bn). On the refining front, GRM came in at US$3.1/bbl. Gross marketing margin (GMM) stood at Rs4.3/ltr, and under-recovery on sale of LPG stood at Rs20.6bn. The stock is trading at 1.2/1.1x FY26/27 P/BV. Singapore GRM is currently averaging at ~US$3/bbl due to surplus supply, but we expect it to rebound to the long term average of US$5-7/bbl and build in a GRM of US$4.5/6/6/bbl for FY25/26/27E. On the marketing front, we build in a GMM of Rs5.3/4.5/4.5/ltr for FY25/26/27E.
Outlook
We revise TP to Rs 412 (Rs365 earlier) and raise multiple to 1.3x avg FY26-27 P/BV as we expect refining margins to improve in the long term and marketing margins to remain moderate.
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