HPCL Q3 Results Review - Medium-Term Prospects Bright Despite The Near-Term Blip: Motilal Oswal

Motilal Oswal Report

Hindustan Petroleum Corporation Ltd. missed our Ebitda estimate for Q3 FY24 due to a lower-than-expected marketing margin of Rs 2.7/litre (estimate: of Rs 3.4/litre) led by suppressed margins on diesel.

Refinery throughput was in line at 5.3 million metric tonne (up 11% YoY). The company expects to clock a refining throughput of 22 mmtpa in FY24 (versus 19 mmtpa in FY23) led by the commissioning of expanded capacity at Vizag refinery.

Singapore GRM has also rebounded to $7.2/barrel of oil in Q4 FY24 t- date (versus $5.5/bbl in Q3 FY24), which may lead to an improvement in refining margins in the upcoming quarter.

In the marketing segment, sales volumes came in 6% above our estimate at 11.9 mmt (up 6% YoY).

HPCL expects to clock a marketing sales volume of 44/45 mmtpa in FY24/25. Oil marketing companies are estimated to be generating strong gross marketing margins of Rs 11.0/Rs 8.6 per liter on petrol/diesel currently.

Among OMCs, HPCL has the highest leverage to marketing and would benefit the most due to an uptick in marketing margins.

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