Sharekhan's research report on Hindustan Petroleum Corporation
Q4FY22 operating profit of Rs. 1,752 crore (up 14.6% q-o-q) sharply missed street estimate on high losses in the marketing business partially offset by GRM recovery. PAT of Rs. 1,795 crore beat estimates on higher other income and lower tax rate. Reported GRM of $12.4/bbl was above our estimate but refining throughput/marketing sales volume/pipeline throughput was below estimate at 4.7 mmt/10.7 mmt/5.3 mmt, up 10.6%/1.2%/down 3.3% q-o-q. Record Singapore GRM of >$20/bbl in Q1FY23 QTD would help cushion against negative motor-spirit/high-speed diesel’s marketing margin to some extent. Thus, a fall in crude oil prices or likely steep HSD/MS retail price hike and MS/HSD excise duty cut remain key for improvement in marketing margins.
Volatile marketing performance make us cut our PE to 4.5x FY24E EPS and thus we lower our PT to Rs. 310 while maintain our Buy on HPCL given attractive valuation of 3.6x/0.7x FY24E EPS/BV and a healthy dividend yield of ~6%.
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