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Informist, Thursday, Oct. 24, 2024

By Ayushman Mishra

MUMBAI – Hindustan Petroleum Corp. Ltd.'s September quarter net profit is expected to be affected due to weak gross refining margins and the deficit in liquefied petroleum gas buffer. The company's marketing margins will likely reduce the impact of weaker refining margins, analysts said.

While HPCL's net profit is seen falling significantly by 65% on year to INR 18.13 billion, its revenue for the September quarter is expected to rise 1% to INR 1.04 trillion, according to the average of estimates from 11 brokerage firms. On a sequential basis, the bottom line is expected to rise 410% but the top line is seen down 14%. 

Of the 11 brokerages, Nirmal Bang Equities has the highest net profit estimate of INR 29.68 billion and YES Securities the lowest estimate of INR 9.65 billion. Anand Rathi Share and Stock Brokers gave the highest estimate for net sales at INR 1.2 trillion while Nirmal Bang gave the lowest estimate for net sales at INR 907.56 billion.

Oil marketing companies are expected to post flat to marginal growth in the latest quarter as the improvement in marketing margins was neutralised by the fall in refining margins and inventory losses, analysts said. The average gross refining margin of public-sector oil companies is seen down at $2.9 per barrel in the latest quarter from $15.8 per barrel in the year-ago quarter and $6.1 per barrel in the previous quarter, Elara Securities said and added that the average crude inventory loss is expected to be $1.9 per barrel compared to a gain of $0.8 per barrel in the last quarter. 

Gross refining margins fell 62% on year in Singapore led by a fall in global product cracks, Nuvama said, and factored in an inventory loss of $1 per barrel. While Nirmal Bang sees the LPG buffer deficit affecting the company's earnings for the September quarter, it said "the silver lining is the potential for government compensation for the deficit in LPG buffer running at INR 18 billion a quarter".

HPCL's earnings before interest, tax, depreciation, and amortisation for the latest quarter is seen at INR 40.92 billion, as per the average of the estimates from 10 brokerages. The operating profit is expected to increase remarkably on the back of strong gross marketing margin, which is expected to be INR 5.3 per litre, Prabhudas Lilladher said. The company's EBITDA is likely to improve 70% sequentially, Emkay Global said.

HPCL's domestic sales volume is seen up 6% on year in the latest quarter, Nuvama said. The brokerage expects the company's throughput to rise 7% both on year and sequentially on the back of increased output from the expanded refinery in Vizag.  

Kotak Institutional Equities, however, expects the losses in inventory and domestic LPG to offset the effect of high automobile fuel marketing margins. The combination of stable crude oil prices and gross refining margins presents the potential for oil manufacturing companies to achieve super normal profits which are not currently reflected in Street estimates, Motilal Oswal said.

The company will announce its quarterly results on Friday. On Thursday, shares of the company closed at INR 404.75 on the National Stock Exchange, up 1.7% from the previous close.

Following are the Jul-Sept earnings estimates of HPCL based on reports compiled by Informist from 11 brokerages:

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Edited by Ashish Shirke

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