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Informist, Monday, May 5, 2025

By Sunil Raghu

AHMEDABAD – Hindustan Petroleum Corp. Ltd. is expected to post a fall in its net profit for the March quarter, owing to a decline in refining and marketing margins. The state-owned company's net profit is expected to fall almost 37% on year due to lower revenue. This is in sharp contrast to the December quarter, when the company had reported a 471% on-year jump in its net profit.

The company's net profit for the March quarter is estimated at INR 18 billion, while its revenue is seen falling 5.9% on year to INR 1.1 trillion, according to the average of the estimates of 11 broking firms. On a sequential basis, the company's bottom line is expected to fall 41%, while the top line is seen falling 2.4%.

The highest projection for the bottom line was by Nirmal Bang Equities Pvt. Ltd. at INR 32.1 billion and the lowest by Emkay Global Financial Services Ltd. at INR 7.6 billion. The highest projection for the top line was by JM Financial Services at INR 1.2 trillion and the lowest by Motilal Oswal at INR 939.6 billion.

Sequentially, oil marketing companies are expected to report a fall in gross refining margins for the quarter, according to analysts. The average benchmark Singapore gross refining margin was $3.2 per barrel in the March quarter, down 58% on year and 36% lower than in the previous quarter, with a fall in global product cracks of gasoline and aviation turbine fuel. 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 $6.6 per barrel for the March quarter and a blended gross marketing margin of INR 3.6 per litre, Prabhudas Lilladher said. In the year-ago quarter, HPCL had clocked a GRM of $5.4 per barrel . Despite better on-year GRMs, analysts expect a drop in net profit due to an expected fall in the company's revenue.

Nuvama Institutional Equities expects Hindustan Petroleum to post a retail margin of INR 6 per litre for diesel, up 58% on year and down 29% on quarter. For petrol, HPCL is estimated to post a retail margin of INR 10 per litre, up 40% on year and down 21% on quarter. The retail margins have risen on year but fallen sequentially due to a rise in crude oil prices and depreciation of the rupee, Nuvama said, adding that it expects the company's throughput to have risen 12% on year in Jan-Mar, led by increased output at the expanded Visakhapatnam refinery.

Nuvama also anticipates a 7% on-year fall in HPCL's earnings before interest, tax, depreciation, and amortisation for the latest quarter owing to weak refining margins and high liquefied petroleum gas under-recoveries, which may well be partially offset by strong marketing margins. The average of the estimates of 11 brokerages pegs the company's EBITDA at INR 42.5 billion. The range of estimates for EBITDA was INR 29.1 billion to INR 65.8 billion.

JM Financial expects the company's EBITDA to decline on quarter due to lower GRMs of around $5 per barrel, mainly due to lower benefit from Russian crude discount. For the December quarter, the company's GRM  was $6 per barrel.

Motilal Oswal feels HPCL may earn "supernormal" profits led by stable crude oil prices and refining GRMs. It expects the company to report a refining throughput of 6.6 million tonnes, up 14% on year, and marketing sales volume of around 12.5 million tonnes, up 1% on year. Commissioning of the new Rajasthan refinery, expected to be operational in Apr-Jun, 2026, and the bottom upgrade project are key factors to watch out for, Motilal Oswal said. During the refining process, crude oil is separated into fractions or products based on boiling points. The bottoms, or the residue, are generally the heavier components, be it heavy fuel oil or asphalt. These are relatively less valuable and harder to market. A bottom upgrade project helps reduce the production of these low-value products by converting them into lighter and marketable fuels as diesel, gasoline and petrochemicals feedstock. 

HPCL will announce its quarterly earnings on Tuesday.

For Apr-Dec, the company had recorded a net profit INR 40.10 billion on revenue of INR 3.46 trillion. The company's throughput during these nine months was 18.53 million tonnes, up 12.4% on year. During Apr-Dec, the company's sales volume was 37.12 million tonnes, including exports, up 7.6% and the average GRM for Apr-Dec was $4.73 per barrel, down from $9.84 per barrel in the year-ago period.

On Monday, shares of the company ended at INR 409.85 apiece on the National Stock Exchange, up 6.4% and 13.2% higher that the close of INR 362.1 on Jan 23, when HPCL had announced its December quarter earnings.

Following are the Jan-Mar earnings estimates for Hindustan Petroleum Corp. based on reports from 11 brokerage firms in descending order by the estimate of net profit:

End

US$1 = INR 84.25

Edited by Avishek Dutta

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