Hold Hindustan Petroleum Corporation; target of Rs 300: ICICI Direct
ICICI Direct’s research report on Hindustan Petroleum Corporation
Hindustan Petroleum Corporation (HPCL) reported Q4FY19 results that were above our estimates on the profitability front on account of a better-than-expected performance in the marketing segment. Reported GRMs were at US$ 4.5/bbl, below our estimate of US$ 4.8/bbl during the quarter on the back of a weak operational performance. Core GRMs were at US$ 2.1/bbl in Q4FY19. Revenues declined 5.2% QoQ to Rs 73150 crore on account of lower average oil prices. On account of healthy numbers from the marketing segment and inventory gains, EBITDA increased to Rs 5166.2 crore, above our estimate of Rs 3513.5 crore. On the profitability front, reported PAT was at Rs 2969.9 crore, above our estimate of Rs 2005.6 crore. The company is currently trading at a dividend yield of ~5% on FY19E numbers.
We are neutral on HPCL at the current juncture given the volatility in oil prices and the intent the new government to pass on costs to consumers during high oil prices. HPCL’s ability to maintain normal marketing margins and trend in refining margins will determine its near term performance. We have a HOLD recommendation on the stock with a target price of Rs 300 (based on average of P/BV multiple: Rs 282/share and P/E multiple: Rs 319/share).
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