Item: Hindustan Petroleum Corporation Ltd.
Rating: 5
Author: Motilal Oswal

Poor margins lead miss; expect marketing to outperform

Buy: Hindustan Petroleum Corpor...

Recommendation Target

Motilal Oswal

HPCLs lower-than-expected refining and marketing margins led to an EBITDA miss in 3QFY20. We have cut our FY20 EPS by 21% owing to the huge miss during the quarter and in light of the weak GRM outlook (trimmed GRM from USD4.2/bbl to USD3.0 for 4QFY20) and the lack of improvement in In 3QFY20, the company recorded higher-than-expected marketing sales volumes, which partially offset lower-than-expected marketing margins. Implied gross marketing margins at INR4.1/liter were lower than est. For 9MFY20, core GRM was lower by 54% YoY to USD2.4/bbl, with refining throughput down 9% YoY, led by shutdowns for BS-VI upgradation. Marketing margin was higher by 13% YoY to INR4.1/liter, while domestic sale of petroleum products was up 5% YoY at 30.1mmt. We have cut our FY20 EPS by 21% owing to the huge miss during the quarter and in light of the weak GRM outlook (trimmed GRM from USD4.2/bbl to USD3.0 for 4QFY20) and the lack of improvement in diesel cracks ahead of IMO.

Comment

Name	Companies Held
Hitesh Ramji Javeri	50
Mahendra Girdharilal	50
Sangeetha S	50
Dheeraj Kumar Lohia	45
Globe Capital Market Ltd	42

Name	Companies Held
Hdfc Trustee Company Limited	112
Reliance Capital Trustee C...	103
Birla Sun Life Trustee Com...	72
General Insurance Corporat...	60
President Of India	56

Name	Returns(%)
Name	Week	Month	Year
Quant Active Fund - Reg - G	0.77%	0.61%	17.15%
UTI - Equity Fund. - Reg - G	0.50%	5.37%	11.64%
HDFC Multi-Asset Fund - Reg - G	-1.68%	1.13%	9.35%
IDFC Focused Equity Fund - Reg - G	-1.07%	1.25%	7.32%
Canara Robeco Bluechip Equity Fund - Reg - G	-0.91%	3.93%	6.92%

Name	Returns(%)
Name	Week	Month	Year
DHFL Pramerica Midcap Opportunities Fund - Reg - G	-1.92%	-0.27%	28.13%
DSP Small Cap Fund - Reg - G	0.18%	1.84%	17.90%
Union Small Cap Fund - Reg - G	-1.31%	-0.69%	15.87%
Kotak Small Cap Fund - Reg - G	0.14%	1.42%	13.96%
UTI - Mid Cap Fund - Reg - G	0.00%	0.38%	12.75%

Name	Returns(%)
Name	Week	Month	Year
Parag Parikh Long Term Equity Fund - Reg - G	-2.80%	-1.69%	17.22%
DHFL Pramerica Diversified Equity Fund - Reg - G	-1.26%	2.14%	14.41%
Quant Mid Cap Fund - Reg - G	-0.02%	-0.41%	14.06%
Taurus Ethical Fund - Reg - G	-0.75%	1.64%	12.87%
Baroda Mid-cap Fund - Reg - G	-0.51%	0.72%	12.06%

Hindustan Petroleum Corporation Ltd.

Poor margins lead miss; expect marketing to outperform

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