Hindustan Petroleum Corporation (HPCL), one of India’s largest public sector refining & marketing companies, has had subdued refining performance in Q1FY22, but the results were better than estimates on profitability front, says ICICIdirect.
The broking firm highlilghts in results update report that revenue of HPCL was down 8.9% QoQ to Rs. 77,585.5 crore (estimate: Rs. 86,400.4 crore) as product sales fell 14% QoQ on account of second wave of Covid-19. Reported GRMs were at US$3.3/bbl while throughput fell 42.8% QoQ to 2.5 MMT due to shutdown and low demand. Marketing performance must have been better than expected as per our understanding. Subsequently, EBITDA was at Rs. 3,193 crore, down 31.6% QoQ (estimate: Rs. 3,061 crore). PAT was at Rs. 1795 crore, down 40.5% QoQ (estimate: Rs. 1520.7 crore).
The report further says that global product cracks continue to remain weak and volatile in the current market environment. HPCL’s refining performance was weak due to refinery shutdown and lower demand. ICICIdirect has retained HOLD rating on the HPCL stock, valuing at Rs. 265 i.e. average of P/BV multiple: Rs. 311/share and P/E multiple: Rs. 218/share.
The report has mentioned the following key triggers for future price performance of HPCL:
- Crude throughput to improve with Mumbai refinery getting commissioned and increase in fuel demand
- Recovery in global refining product cracks (mainly diesel)
- Pick-up in transport fuel demand with relaxations in lockdown and steady marketing margins
- Consistent dividend payout
(Share Manthan, August 10, 2021)
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