Sell Hindustan Petroleum Corporation; target of Rs 340: Prabhudas Lilladher

Prabhudas Lilladher's research report on Hindustan Petroleum Corporation

Hindustan Petroleum Corporation (HPCL) reported lower than expected Q1 results with EBITDA of Rs21.1bn (down 56.1% QoQ; PLe: Rs45.3bn) and PAT of Rs3.6bn (down 87.5% QoQ; PLe: Rs20bn). On the refining front, GRM came in at US$5/bbl. However, gross marketing margins (GMM) came in weak at Rs3/ltr owing to an under-recovery of Rs24bn on the marketing front. The stock currently trades at 1.5/1.3x FY25/26 P/BV. Going ahead, given the weak Singapore GRM and factoring in demand concerns in the long run we build in a GRM of US$5.8/6 for FY25/26E.

Outlook

On the marketing front, we build in a gross marketing margin of Rs4.2/4.5ltr for FY25/26E. We raise our multiple but maintain ‘Sell’ rating with a TP of Rs340 based on 1.2x FY26 P/BV.

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