ICICI Direct recommended hold rating on Hindustan Petroleum Corporation with a target price of Rs 265 in its research report dated August 09, 2019.
ICICI Direct's research report on Hindustan Petroleum Corporation
Hindustan Petroleum Corporation’s (HPCL) Q1FY20 results were marginally below our estimates on the operational front. Although the refining segment profitability disappointed due to inventory losses, marketing segment profitability was better than our estimates. The topline increased 2.3% QoQ to Rs 74808.1 crore on account of higher average oil prices. GRMs were at US$0.8/bbl, below our estimate of US$3.4/bb on account of inventory loss of US$2.6 /bbl. EBITDA came in at Rs 1643.9 crore (down 68.2% QoQ) marginally below our estimate of Rs 1744.5 crore. However, reported PAT was at Rs 811 crore, above our estimate of Rs 754.9 crore on account of higher other income.
We are neutral on HPCL at the current juncture given the volatility in global GRMs and uncertainty on the company’s ability to pass on costs to customers during high oil prices. IOC’s marketing margins and trend in refining margins will determine its near term performance. We have a HOLD recommendation on the stock with a target price of Rs 265.
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