HPCL Q3 Results Review - Growth Catalysts Offset Weak Quarter: Nirmal Bang

Nirmal Bang Report

Hindsutan Petroleum Corporation Ltd.’s standalone profit after tax at Rs 5.29 billion was a 57.4%/70.4% miss versus our estimate/street estimate. Revenue was 2.6% lower than our estimate and 13.4% higher than street estimate. Ebitda was a 36.3% miss on our estimate and Ebitda margin was a 101 basis points miss.

Gross margin at 6.8% was a miss of 33 bps. Contribution was lower by 7.1% versus our estimate, due to-

1. the 28.4% miss in gross refining margin which came in at $8.54/barrel of oil, and

2. the 7.1% miss in refining throughput reported at 5.34 mt.

Marketing volumes at 11.9 mt showed a beat of 4.3%. Refining also got hit by inventory loss ~ Rs 7 billion.

We have raised earnings for FY24E/ FY25E/ FY26E by 37.5%/ 32.5%/25.9%, driven by increased refining margin and throughput in Vizag. This is based on visibility on-

1. Vizag expansion already in operation at 13 mtpa (versus full capacity of 15 mtpa) and

2. gains in GRM post-start up in residue upgradation project by Q3 FY25.

We have rolled over to December-25E.

We have raised target price by 51.4% to Rs 530, based on the revised estimates using a raised target PE of 5.5 times versus old PE of 4.5 times.

The new PE implies potential rerating in HPCL based on operational gains in Vizag and potential value unlocking from proposed Lubricants hive off.

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