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Informist, Tuesday, Jul 30, 2024

--HPCL: Saw substantial under-recoveries in LPG business 

--HPCL: See GRMs for refineries at $5-$8/bbl going forward 

--HPCL: GRMs to improve as demand in India robust 

--HPCL: 35-40% of our crude coming from Russia 

--HPCL: Plans in progress to unlock value of lubricant ops

--HPCL: Chhara LNG terminal to be commissioned by Dec 

--HPCL: Rajasthan refinery debt at 320 bln rupees 

--HPCL: Using AI for retail operations, demand analytics 

--HPCL: May take 6-9 months to deploy AI digital infra 

By Anshul Choudhary and Narayana Krishna

MUMBAI – Despite pressure of under-recoveries in the liquefied petroleum gas business and inventory losses in marketing and refining operations, Hindustan Petroleum Corp Ltd's EBITDA in Apr-Jun came as a surprise to some analysts. The company mentioned that this was largely on the back of higher volumes across its products, but analysts were not satisfied with the explanation. EBITDA stands for earnings before interest, taxes, depreciation, and amortisation.

"When we add under recoveries in LPG, inventory losses, and slight QoQ fall in diesel margins...the QoQ increase (in EBITDA) seems to be large," an analyst said during HPCL's post-earnings conference call. Brokerage Prabhudas Lilladher said HPCL's EBITDA during the quarter was 21.1 bln rupees.

Further, the company said it had 24 bln rupees of under-recoveries in its liquefied petroleum gas business as on Jun 30, while inventory losses in the marketing business in Apr-Jun were 2.45 bln rupees. Inventory losses in the refining business were 1.13 bln rupees during the reporting quarter.

On questions about its EBITDA, the company said this was largely driven by higher sales volumes across products in the marketing segment. "...can be attributed to increase in our market sales...increase in sales of all the products in terms of MS (motor spirits), HSD (high-speed diesel), lubricants, LPG etc," the management said without revealing exact EBITDA numbers for the segment.

However, an analyst pointed out, "...considering the fact that diesel marketing margin was slightly lower than the last quarter, there seems to be a large delta QoQ. Is it because of other products, or should we expect some part of this to be reversed in the next quarter?" To this, the company said there was no "extraneous" gain this quarter, but did not provide more details as to what contributed to EBITDA on the marketing side. The management went on to suggest that analysts connect with the company post call for more clarity.

During the call, the company said gross refining margins are expected to improve going forward amid strong demand in India. They expect the GRMs for refineries to be in the range of $5-$8 per barrel going forward.

Crude oil procured from Russia during the June quarter was 35-40% of the company's overall crude consumption, the management said. This was significantly higher than the contribution of 25% in the same period last year.

Providing an update on its projects, the company said the refinery part of its new plant in Barmer, Rajasthan, is likely to be commissioned by the end of this financial year. The Rajasthan refinery's debt was at 320 bln rupees as on June 30, the company said. Further, HPCL's liquefied natural gas terminal in Chhara is expected to be commissioned by December-end. 

On its plans for the lubricant business, HPCL management said it is going ahead with the plan to carve out this business. "The moment we get the approval from concerned authority, our intention is to hit the market," the management said on the call.

Among other investments, the company said it was using artificial intelligence for video analytics at retail outlets and demand forecasting. The digital transformation exercise is likely to go on for six-nine months, the management said.

Hindustan Petroleum Corp reported its June quarter earnings post market hours on Monday. Its net profit fell 94% on year and 87% on quarter to 3.56 bln rupees. At the same time, revenue from operations--net of excise duty--rose 1.6% to 1.14 trln rupees. Today, shares of HPCL closed 3.9% higher at 395.75 rupees on the National Stock Exchange.  End

US$1 = 83.73 rupees

Edited by Aditya Sakorkar

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