HDFC Securities
HPCL is doubling its existing capacity at Visakh from 8.3mmtpa to 15mmtpa by FY21E (outlay Rs. 210bn) and increasing it from the current 7.5mmtpa to 9.5mmtpa (outlay Rs 50bn) at Mumbai. This will drive the earnings for its refinery business. We remain constructive on HPCL in a falling crude price scenario as it will (1) Reduce Govt's intervention in auto fuel pricing, (2) Reduce working capital, (3) Put subsidy burden overhang to rest. Our SOTP target is Rs 362 (6x Sep 21E EV/e for standalone refining and pipeline, 7x EV/e for marketing and Rs 54/sh from other investments). Maintain BUY. We maintain BUY on HPCL following a decent run in Q2. Furthermore, 55% refinery capacity addition (taking total capacity to 24.5mmt) by FY21E and stable marketing margins post elections gives us confidence in HPCL.
Hindustan Petroleum Corporation Ltd. is trading above it's 50 day SMA of 186.8
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