Hold Hindustan Petroleum Corporation; target of Rs 247: Prabhudas Lilladher

Prabhudas Lilladher's research report on Hindustan Petroleum Corporation

HPCL reported lower than expected Q1 results with standalone EBITDA of - Rs125bn (Q4: +Rs 21bn; PLe –Rs61bn) and PAT of –Rs102bn (Q4: Rs17.9bn; PLe –Rs70.4bn), led by loss of Rs9.8bn due to steep marketing loss and excise duty cuts on petrol and diesel’s unsold inventory. Core EBIDTA adjusted for inventory and forex loss was at –Rs105.7bn vs Rs21.8bn in Q4. We believe uncertain geopolitical environment will keep diesel marketing losses high given 1) gas to oil switch from high spot LNG prices 2) global low inventory and 3) lower exports from China and Russia.

Outlook

We lower our FY24E earnings by 45% and downgrade to ‘HOLD’ from ‘BUY’ with a revised PT of Rs247 (Rs368 earlier) based on 7x PER FY24E (6x PER FY23 earlier) and add value of investments. We also lower our marketing margins assumptions and factor loss of Rs20.1bn in FY23 vs PAT of Rs30bn earlier.