Wednesday, 15 February 2017

Hold Hindustan Petroleum Corp; target of Rs 614

Hindustan Petroleum Corporation (HPCL) reported Q3FY17 PAT of INR 15.9bn (up 127% QoQ), which was 6% below estimates. Earnings miss was primarily on account of lower than expected GRM of USD6.4/bbl (Edel estimate: USD7/bbl), while throughput came 4% ahead. During Q3FY17, OMCs recovered 0.5% in market share from private players. Q4FY17 appears mixed as: 1) QTD Singapore benchmark, at USD6.8/bbl, is flat QoQ; and 2) while QTD diesel margin is down 5%, petrol margin is up 11% QoQ. 

The highly profitable Bhatinda refinery will continue to drive consolidated earnings. Maintain ‘HOLD’ with target price of INR 614. HPCL offers an attractive dividend yield of 4%.

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