Motilal Oswal's research report on HPCL
HPCL reported a beat on our 4QFY23 EBITDA estimate led by higher-thanexpected GRM of USD14.1/bbl (v/s est. of USD10.6/bbl; up 12% YoY). PAT was at INR32.2b (v/s est. of INR20.7b) due to higher-than-estimated other income. Refinery throughput stood at 5mmt (est. of 4.8mmt; up 6% YoY). Singapore GRM of USD8.2/bbl in 4QFY23 has now dropped to ~USD3.3/bbl in 1QFY24’td, which could hit refining margins in the coming quarter. Besides, over the past few quarters, HPCL’s GRM has been lower than other OMCs (IOCL, BPCL), owing to the ongoing expansion at the Vizag refinery. In the marketing segment, sales volumes were in line at 11.1mmt (up 4% YoY). OMCs are estimated to be generating a gross marketing margin of INR7.6/INR10.2 per liter on petrol/diesel in 1QFY24’td. HPCL has the highest leverage to marketing among OMCs and would benefit the most due to improvement in marketing margins.
Outlook
We expect consolidated net debt to rise to INR747b in FY25 from INR664b in FY23. We value the stock at 0.9x FY25E P/BV and maintain our Neutral rating with a TP of INR270.
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