Buy HPCL; target of Rs 500: Emkay Global Financial

Emkay Global Financial's research report on HPCL

HPCL reported better than expected Q4FY25 earnings, with SA EBITDA/PAT of Rs57.3/33.5bn – at a sizable beat, driven by better-than-expected GRMs as well as marketing margins. Core GRM of USD7.1/bbl was higher than our USD6.0/bbl estimate, while blended marketing margin at Rs5.5/kg came at a 16% beat. Domestic marketing volumes rose 2.6% vs 1.8% degrowth for the industry. In FY25, HPCL outperformed PSU peers, gaining 0.25% market share. LPG loss rose 6% QoQ to Rs33bn in Q4, while net debt grew 6% YoY/19% QoQ to Rs579bn. The new CMD stressed on focus on returns from the current capex cycle which is coming to an end and generating positive FCF with debt reduction.

Outlook

We raise FY26E/27E EPS by 22%/16%, building in better margins; we raise our rolled over Mar-26E TP by ~11% to Rs500 from Rs450; retain BUY.