Buy Hindustan Petroleum Corporation; target of Rs 463: HDFC Securities

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HDFC Securities' research report on Hindustan Petroleum Corporation

HPCL’s 1QFY19 EBITDA came in at Rs 31.91bn, up 96% YoY owing to 22% increase in GRM to USD 7.15/bbl (including inventory gains of USD 3.47/bbl). Marketing volumes were up 5% YoY while gross marketing margins were down 9.4% YoY to Rs 3.61/ltr. PAT stood at Rs 17.19bn up 86% YoY on lower other income at Rs 3.06bn (-46.4% YoY) and higher interest cost at Rs 1.91/bn (+33.5% YoY).

Outlook

We believe, with recent corrections most negatives seem to be priced in and valuations are  compelling.  Our  SOTP  target  is  Rs  463 (5x Jun 20E EV/e for standalone  refining,  8x  EV/e for marketing, 9x for pipeline and Rs 159/sh from other investments). Maintain BUY.

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