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Hindustan Petroleum Corporation Ltd>
  • CMP : 340.9 Chg : -182.95 (-34.93%)
  • Target : 220.0 (7.84%)
  • Target Period : 12 Month

04 Nov 2022

One-time LPG grant helps narrow losses…

About The Stock

Hindustan Petroleum Corporation (HPCL) is one of India’s largest public sector refining & marketing companies.

  • The company operates more than 19000 retail outlets
  • Petrol & diesel together historically contributed more than 60% of total sales

HPCL’s results were above our estimates on the profitability front.

  • Revenue was up 30.3% YoY (down 6% QoQ) to ₹ 114172.3 crore (I-direct estimate: ₹ 105392.3 crore). Product sales grew 12.3% YoY (down 5.6% QoQ) to 9.9 MMT
  • Reported GRMs were at US$8.4/bbl while throughput was up 77.5% YoY (down 6.7% QoQ) to 4.5 MMT. EBITDA loss was at ₹ 1497.9 crore (I-direct estimated EBITDA loss: ₹ -4333.9 crore). HPCL received a one-time grant of ₹ 5617 crore from the Government of India for under-recoveries on sale of domestic LP
  • Subsequently, net loss was at ₹ 2172.1 crore (I-direct estimated loss:₹ 4079.8 crore)
What should Investors do?

HPCL’s refining profitability declined QoQ due to a decline in product cracks. It has not passed on higher crude oil costs to customers while weaker marketing profitability is likely to impact earnings in the near term.

We retain our HOLD rating on the stock

Target Price and Valuation

We value HPCL at ₹ 220 i.e. average of P/BV multiple: ₹ 195/share and P/E multiple: ₹ 245/share.

Key Triggers for future price performance
  • Crude throughput to improve with increased capacity getting commissioned
  • Product cracks sustaining at higher level
  • Passing on higher crude oil costs to customers
  • Consistent dividend payout
Alternate Stock Idea

Apart from HPCL, in our oil & gas coverage we also like Gail.

  • Gail is a beneficiary of increasing gas consumption. Stable volume growth along with higher profitability from gas trading, petchem and LPG segment due to higher oil prices will add value


  • BUY with a target price of ₹ 100

Key Financial Summary

Particulars FY19 FY20 FY21 FY22E 5 Year CAGR (FY17-22E) FY23E FY24E 2 Year CAGR (FY22E-FY24E)
Revenues (| crore) 296,928.4 287,407.3 270,326.3 373,896.7 11.8 428,072.6 395,603.3 2.9
EBITDA (| crore) 11,442.0 5,123.2 15,925.4 10,175.9 -0.8 -5,109.4 14,163.7 18.0
Net Profit (| crore) 6,028.7 2,637.3 10,663.9 6,382.6 0.6 -5,638.3 6,786.0 3.1
EPS (|) 39.5 17.3 70.6 44.9 - -39.7 47.8 -
P/E (x) 5.2 11.8 2.9 4.5 - -5.1 4.3 -
Price / Book (x) 1.1 1.1 0.9 0.7 - 0.9 0.8 -
EV/EBITDA (x) 5.1 14.4 4.5 7.4 - -17.3 6.4 -
RoCE (%) 15.2 2.5 15.6 7.3 - -9.9 8.3 -
RoE (%) 21.4 9.1 29.5 16.5 - -17.1 18.3 -
Source: Company, ICICI Direct Research

Key takeaways of recent quarter & conference call highlights

Q2FY23 Results: Refining profitability better than estimates

  • HPCL’s results were better than our estimates on account of the one-time grant. While refining margins were higher than estimated, marketing losses were higher than estimates, as per our understanding
  • Reported GRMs at US$8.4/bbl were higher than expectations of US$5.1/bbl. The company did not disclose refining inventory details. We estimate GRMs at US$9.1/bbl, US$8/bbl in FY23E, FY24E, respectively taking into account recent product cracks trend
  • On account of increase in refining capacity, we estimate crude throughput of 20 MMT and 24.5 MMT for FY23E and FY24E, respectively
  • We estimate marketing sales at 41.2 MMT and 43 MMT in FY23E and FY24E, respectivel
  Q2FY23 Q2FY23E Q2FY22 YoY (%) Q1FY23 QoQ (%)   Comments
Total Revenues 1,14,172.3 1,05,392.3 87,600.4 30.3 1,21,448.8 -6.0   Higher than estimates
Raw materials costs 1,04,550.9 97,983.6 75,814.0 37.9 1,21,348.2 -13.8    
Employees Cost 739.5 837.6 782.8 -5.5 706.0 4.7    
Other Expenses 10,379.7 10,905.0 7,990.0 29.9 11,889.2 -12.7    
Total Expenditure 1,15,670.1 1,09,726.2 84,586.8 36.7 1,33,943.4 -13.6    
EBITDA -1,497.9 -4,333.9 3,013.6 -149.7 -12,494.6 -88.0   Better than estimates due to better refining margins and one-time LPG grant
EBITDA margins (%) -1.3 -4.1 3.4 -475 bps -10.3 898 bps    
Depreciation 1,080.9 1,157.3 947.3 14.1 1,094.5 -1.2    
EBIT -2,578.8 -5,491.2 2,066.3 -224.8 -13,589.0 -81.0    
Interest 595.0 413.2 154.5 285.2 332.7 78.8    
Other Income 280.5 450.0 449.4 -37.6 339.7 -17.4    
Extra Ordinary Item 0.0 0.0 0.0 NA 0.0 NA    
PBT -2,893.2 -5,454.3 2,361.2 -222.5 -13,582.0 -78.7    
Total Tax -721.1 -1,374.5 437.7 -264.7 -3,385.0 -78.7    
PAT -2,172.1 -4,079.8 1,923.5 -212.9 -10,196.9 -78.7    
Key Metrics                
Exchange rate (₹/$) 79.8 79.8 74.1 7.7 77.3 3.3    
Throughput (mmt) 4.49 4.4 2.5 77.5 4.8 -6.7   In line with estimates
Sales (mmt) 9.9 9.5 8.8 12.3 10.5 -5.6   Higher than estimates
GRM ($/barrel) 8.4 5.1 2.4 245.2 16.7 -49.7   Higher than estimates



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