Earnings Outlook
Refining, marketing margins seen boosting HPCL Oct-Dec PAT
This story was originally published at 19:08 IST on 22 January 2025
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By Akshay V. Johnson
MUMBAI – Hindustan Petroleum Corp. Ltd. is expected to post strong growth in net profit for the December quarter led by higher refining and marketing margins and the statistical effect of a weak base. The state-owned company's net profit is expected to increase six-fold year-on-year despite a likely fall in revenues. This is in sharp contrast to the September quarter when the company's net profit fell by almost 88%.
The company's net profit for the December quarter is expected to increase to INR 32.22 billion, while its revenue is seen falling 10% on year to INR 1.00 trillion, according to an average of estimates from 13 broking firms. On a sequential basis, the company's bottom line is expected to increase five-fold while the top line is seen increasing marginally.
Among the estimates, the highest projection for the top line is by Dolat Capital Market Pvt. Ltd. at INR 1.13 and the lowest is by ICICI Securities Ltd. at INR 840.60 billion. The highest projection for the bottom line is by ICICI Securities at INR 56.30 billion and the lowest is by Kotak Institutional Equities at INR 18.99 billion.
Sequentially, the oil marketing companies are expected to report better gross refining margins in the quarter, analysts said. The average Singapore gross refining margin for the December quarter was the highest in three quarters at $5 per barrel, up $1.4 per barrel sequentially due to a rise in product cracks. Product crack is the difference between the price of a barrel of crude oil and the price of a barrel of specified product. A higher product crack means refiners make more money when processing crude oil into refined products.
Hindustan Petroleum Corp. is expected to report a gross refining margin of $5.3 per barrel for the December quarter and a blended gross marketing margin of INR 5.5 per litre, Prabhudas Lilladher said. Marketing margins on petrol and diesel have remained strong for the quarter, analysts said. The company is expected to post a retail margin of INR 9 per litre for diesel, up four times on year, and INR 13 per litre for petrol, up 41% on year, Nuvama Institutional Equities said. The brokerage expects domestic volumes to rise 7% on year and throughput to rise 18% on year, led by increased output from the expanded Visakhapatnam refinery.
HPCL's earnings before interest, tax, depreciation, and amortisation for the latest quarter is seen at INR 60.24 billion, as per the average of the estimates from 12 brokerages. The company's EBITDA is expected to be in the range of INR 42.35 billion to INR 90.10 billion.
Kotak Institutional Equities, which has the lowest estimate for net profit for HPCL in the December quarter, expects the company's EBITDA to increase two-fold on a year-on-year basis because of a weak base, higher auto fuel marketing margins, and better refining margins sequentially. The brokerage expects the earnings growth to be offset by higher sequential losses on domestic liquefied petroleum gas.
HPCL is the top pick among the oil marketing companies, Motilal Oswal said. The brokerage expects a combination of stable crude oil prices and higher gross refining margins to present an opportunity for the oil marketing companies to earn super-normal profits, which is currently not reflected in Street estimates. Motilal expects the company to report a refining throughput of 6.3 million tonnes, up 18% on year, and marketing sales volume of around 12.2 million tonnes, up 2% on year.
The company will announce its quarterly results on Thursday. On Wednesday, shares of the company closed marginally higher at INR 370.10 on the National Stock Exchange.
Following are the Oct-Dec earnings estimates for Hindustan Petroleum Corp. based on reports from 13 brokerage firms in descending order by the estimate of net profit:
Brokerage Firm | Net Sales (in INR million) | Net Profit (in INR million) | EBITDA (in INR million) |
ICICI Securities Ltd. | 840,600.00 | 56,300.00 | 90,100.00 |
Anand Rathi Share and Stock Brokers Ltd. | 1,041,841.00 | 44,643.00 | -- |
YES Securities (India) Ltd. | 1,110,127.00 | 38,755.00 | 72,507.00 |
Elara Securities (India) Pvt. Ltd. | 1,027,325.00 | 36,014.00 | 71,094.00 |
Emkay Global Financial Services Ltd. | 1,026,974.00 | 35,345.00 | 58,606.00 |
Nirmal Bang Equities Pvt. Ltd. | 998,342.00 | 34,095.00 | 67,294.00 |
Nuvama Wealth Management Ltd. | 1,101,206.00 | 33,235.00 | 64,004.00 |
Prabhudas Lilladher Pvt. Ltd. | 874,600.00 | 26,500.00 | 54,100.00 |
Nomura Equity Research | 863,100.00 | 26,000.00 | 52,800.00 |
JM Financial Institutional Securities Pvt. Ltd. | 1,053,506.00 | 23,833.00 | 52,623.00 |
Motilal Oswal Financial Services Ltd. | 931,077.00 | 23,441.00 | 49,509.00 |
Dolat Capital Market Pvt. Ltd. | 1,127,200.00 | 21,700.00 | 47,900.00 |
Kotak Institutional Equities | 1,045,734.00 | 18,991.00 | 42,351.00 |
Average | 1,003,202.46 | 32,219.38 | 60,240.67 |
End
US$1 = INR 86.56
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Saji George Titus
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