Hold Hindustan Petroleum Corporation; target of Rs 195: Prabhudas Lilladher

Prabhudas Lilladher's research report on Hindustan Petroleum Corporation

We maintain our FY23/24E earnings estimate, due to possibility of adhoc government grants to compensate for marketing losses. HPCL reported better than expected Q2 results with EBITDA of -Rs14.9bn (-88%QoQ; PLe - Rs 86.4bn) and PAT of –Rs21.7bn (PLe –Rs95.9bn), due to receipt of one time grant of Rs56.2bn towards LPG under recovery for H1FY23. Also lower than expected inventory loss cushioned Q2 performance vs our expectation of Rs39bn loss. We believe OMCs earnings will be hit by sharp jump in diesel marketing losses (current diesel loss at Rs10/litre) given low inventory, gas to oil switch (because of high spot LNG prices) and drop in Russian exports (despite improvement in refining profitability).

Outlook

Considering high crude price volatility we maintain ‘HOLD’ rating at PT of Rs195 (unchanged). Any sharp correction in crude prices is an upside risk to our estimates.

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