Buy HPCL; target of Rs 475: Emkay Global Financial

Emkay Global Financial's research report on HPCL

HPCL’s Q1FY25 SA EBITDA was 27% lower than expected, at Rs21.1bn, mainly due to lower marketing margins (LPG under-recoveries of Rs24bn), and partly offset by higher reported GRM at US$5/bbl vs our estimate of US$4/bbl. Marketing performance was weaker than expected; gross debt fell 5% QoQ to Rs574bn as of Jun-24-end. The mgmt indicated that the Vizag bottom upgradation would commission by Q3FY25, with peak benefit of ~US$3/bbl on GRMs. First crude at Barmer is starting by Q4-end. We retain our positive stance on HPCL, encouraged by stable macros, a better marketing outlook, and value unlocking in lubes. We tweak FY25-26E EPS by 2% each, adjusting GRMs and marketing margins.

Outlook

We retain BUY on the stock, with 19% higher Sep-25E TP of Rs475/sh on roll-over, and a high.