Hindustan Petroleum Corporation Ltd. share price target

HPCL's Q1FY20 result came below our forecast mainly driven by higher inventory loss. Revenue was up 5% YoY to Rs709bn while EBITDA/PAT was down 48.5%/52.8% YoY to Rs16.4/8.1bn. Reported GRM stood at US$0.8/bbl as against US$7.2/bbl in Q1FY19 whereas core GRM stood in-line to our forecast at US$3.3/bbl. The company reported inventory loss of Rs5.4bn, adjusting to which the numbers are largely in-line to our forecast. We have cut our EBITDA forecast for FY20E by 10% to factor in high inventory loss and kept the same for FY21E. We continue to maintain our TP of Rs288 based on 5.5x on EV/EBITDA (Rs273/share) and 20% discount to its investment in MRPL and...

The correction in oil prices led to super-normal marketing margins for OMCs in Q4FY19, which led to lower margins QoQ. However, on an absolute basis, the marketing segment reported a stable performance in Q1FY20. We expect similar profitability from this segment in coming quarters. In terms of marketing sales, HPCL increased 1.9% QoQ to 9.8 MMT, below our estimates on account of lower-than-expected LPG and diesel sales. Going forward, we expect marketing sales volumes to grow at a rate of 4-5%. The crude throughput in Q1FY20 was lower 13.3% YoY at 3.9 MMT, in line with...

HPCL's Q1FY20 earnings at Rs 8.1bn (52% YoY) came in below estimates, marred by low GRMs (US$ 0.75/bbl, after US$ 2.6/bbl inventory loss).

Company expects to achieve stabilization of refinery in a span of 9- 12months, while we believe it could take longer. The incremental 2mmtpa from the Mumbai refinery expansion is expected to reflect in the companys volumes from mid-FY21. Already ~80% of the orders (out of the total capex at ~INR290b) are in place for both the Vizag and Mumbai refineries. The Rajasthan refinery is expected to have a total capex of ~INR440b, including the companys equity commitment of ~INR110b. Expected capex to be spent of the total INR110b, ~10%/20% in FY20/21. Also, polypropylene expansion at Bhatinda is expected to get completed in the next 2-3 years (currently expansion is ~30% complete), with a total capex of INR160b. The company expects cost reduction and recovery of certain unrecoverable items to result in marketing margin expansion. HPCL has planned shutdown at the Vizag and Mumbai refineries in 3Q-4QFY20 for a period of 45 days, to align petrol/diesel quality to BS-VI.

Weak global GRMs to impact refining business performance Reported GRMs during the quarter were at US$4.5/bbl, below our estimate of US$4.8/bbl. Inventory gain was at US$2.4/bbl. The company reported weak core GRMs at US$2.1/bbl on account of a weak operational performance. Benchmark Singapore GRMs are remaining weak in the current quarter also (Q1FY20-TD) at US$4/bbl with weak product spreads. Hence, operational efficiencies will play a key role in deciding HPCL's performance in coming quarters. We estimate GRM at US$4.9/bbl and...

HPCL is doubling its existing capacity at the Visakh refinery from 8.3mmtpa to 15mmtpa by FY21 (Outlay Rs. 210bn) and increasing it from the current 7.5mmtpa to 9.5mmtpa (Outlay Rs 50bn) at its Mumbai refinery. This will drive the earnings of the refinery business. OMCs could not take any price hike to compensate for the rising product prices till mid-May in an election-packed environment. Now onwards, normative margins will be restored allowing HP to be the largest beneficiary as its earnings are highly sensitive to changes in the marketing margins (EBITDA contribution of ~60% vs 55/44% for BP/IOC). Our SOTP target is Rs 346 (6x Mar 21E EV/e for standalone refining and pipeline, 7x EV/e for marketing and Rs 57/sh from other investments). We prefer HPCL among the OMCs given the (1) Impending 55% refinery capacity addition to 24.5mmt by FY21E, vis-a-vis no visibility on additional capacities for other OMCs (2) Restoration of marketing margins post elections that will benefit HPCL the most as this business contributes ~60% to its EBITDA. Maintain BUY.

HPCL's Q4FY19 result came above our expectation mainly driven by highest-ever marketing profit and sales volume. Revenue was up 11.7% YoY to Rs679bn while EBITDA/PAT was up 76.8%/69.9% YoY to Rs51.6/29.7bn. Reported GRM stood at US$4.5/bbl as against US$7.4/bbl in Q4FY18. We expect marketing margin to remain higher compared to its three years average which would continue to support marketing profit. We introduce FY21 financials and roll over our valuation which gives a new TP of Rs288 from Rs262 earlier. Since stock has already run-up over 30% since our last report, we downgrade the stock to HOLD from BUY on valuation....

a gain of INR0.9b in 3QFY19. PAT was up 70% YoY at INR29.7b in the quarter. Reported GRM was at USD4.5/bbl (v/s USD7.1 in 4QFY18 and USD3.7 in 3QFY19). Refining throughput was flat YoY/QoQ at 4.6mmt. Marketing sales volume grew 7% YoY (4%QoQ) to 10.1mmt in 4QFY19. Implied gross marketing margin (incl. inventory) stood at INR5.9/lit (v/s INR4.4 in 4QFY18 and INR3.3 in 3QFY19). Adj. EBITDA was at INR107.1b (+9% YoY) in FY19 v/s INR98.5b in FY18. PAT...

ICICI Securities Ltd | Retail Equity Research Hindustan Petroleum Corporation's (HPCL) Q3FY19 results were below our estimates on the profitability front mainly on account of higher-than-expected inventory losses. The topline increased 5.2% QoQ to | 77182.4 crore on account of higher product sales HPCL achieved crude throughput of 4.6 MMT in Q3FY19 in line with our estimates. GRMs were at US$3.7/bbl, above our estimate of US$2.1/bbl in spite of inventory losses of US$6.3/bbl. The company...

Our SOTP target is Rs 254 (5x Sep 20E EV/e for standalone refining, 6x EV/e for marketing and pipeline and Rs 79/sh from other investments). Upgrade to BUY HPCLs 3QFY19 EBITDA came in at Rs 9.63bn, down 69.5% YoY and 54.6% QoQ primarily owing to Rs 34.65bn of inventory losses. Adjusting for inventory losses and forex gains, core EBITDA was Rs 38.31bn. Operationally, it was a strong quarter with core GRM (excluding inventory losses of USD 6.29/bbl) at USD 10/bbl vs USD 6.1/bbl in 3QFY18.