HPCL Q1 Results Review - Weak Reported Gross Refining Margin Among The OMCs: Dolat Capital

Dolat Capital Report

Hindustan Petroleum Corporation Ltd.’s Q1 FY25 Ebitda/profit after tax came significantly below our estimates at -23%/-62% respectively mainly due to the under-recovery on LPG, thereby dragging gross marketing margin of other oil products.

Adjusted marketing Ebitda increased by 3% QoQ. The company plans to sell 0.7 million metric tonne of lube in FY25E with an implied unit Ebitda of Rs 12/litre.

We broadly maintain our FY25/FY26 EPS estimates. T

he stock is trading at a premium valuation on one-year forward (enterprise value/Ebitda and price/book value) versus long-term average. However, factoring no near-term clarity on the rising under-recovery and continuation of weak GRM, we build in GRM/GMM assumptions of $9.8/$10.5 per bbl and Rs 3.2/litre for FY25E/FY26E.

Revise to ‘Sell’ rating from Reduce with SoTP-based target price of Rs 331 (Rs 321 earlier), given the recent run-up in stock price.

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