Buy Hindustan Petroleum Corporation; target of Rs 310: Prabhudas Lilladher

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26 Aug, 2025 12:21

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We lower our FY23 estimates in view of Rs123bn losses in 9MFY23 and low probability of further government support with small tweak in FY24/25E earnings estimate by -0.4%/1.6%. Hindustan Petroleum Corporation (HPCL) reported better than expected Q3 results with EBITDA of Rs16.7bn (Q2: loss of Rs14.9bn; PLe loss of Rs 37.9bn) and PAT of Rs1.7bn (Q2: loss of Rs21.7bn; PLe loss of Rs48.4bn), due to better than expected marketing profitability. Improving marketing environment along with strong GRMs will drive near term earning given 1) improved marketing margin (Rs1.8/ltr) post sharp correction in international diesel prices to ~$110 (recent peak of USD170/bbl) 2 firm refining product spreads due to ban on import of Russian oils 3) range bound oil prices due to global recessionary pressure and high interest rates, despite increased demand from China.

We believe HPCL along with other OMCs, are all well placed to benefit from improving marketing situation and healthy refining profitability. Maintain ‘BUY’ with a PT of Rs310 (Rs350) based on 7x EV/E FY24E.

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