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Hindustan Petroleum Corporation (HPCL):GRM lower than expected at US$2.4/bbl

News: PCL's revenue increased 12.9% QoQ to Rs.87600.4 crore as marketing sales increased 4% QoQ to 8.8 MMT in Q2FY22. On the refining front, crude throughput was 2.5 MMT, flat QoQ while reported GRM stood at US$ 2.4/bbl. EBITDA came in at Rs.3013.6 crore, down 5.6% QoQ. The company reported lower depreciation and interest costs. Subsequently, reported PAT was at Rs.1923.5 crore, up 7.2% QoQ.

Views: Refining segment's performance was below estimates while marketing segment's profitability was broadly in line with estimate as per our understanding. In the current quarter (Q3FY22-TD), further sales growth will be important. Compared to other OMCs, HPCL’s GRMs were subdued and lower than our estimate, which affected overall performance. With a gradual recovery in global product cracks, increase in GRMs will be key monitorable. Improvement in refining profitability coupled with growth in fuel demand will be important for HPCL's performance in the near term.