Edelweiss on HPCL
Hindustan Petroleum Corporation (HPCL) reported strong core EBITDA (ex. inventory) of INR28bn (up 26% YoY, 60% QoQ, 18% ahead of our estimates) on robust all-round performance. Key highlights: 1) core GRM at USD6.6/bbl (vs. IOCL at USD6.1/bbl) came 8% ahead, consequently core refining EBITDA (up 9% QoQ) stood 9% ahead; and 2) core marketing EBITDA also came 40% ahead, despite slightly slower-than-industry sales volume growth.
While marketing margins improved post the Gujarat elections, rising international fuel prices amidst an election-heavy calendar continue to weigh on OMCs’ marketing business. Factoring in lower marketing margin, we cut FY19/20E earnings by 6%/2%. Maintain ‘HOLD’ with revised SoTP-based TP of Rs 348 (Rs 440 earlier), as we lower EV/EBITDA multiple for the marketing business (5x FY20E vs. 5.5x earlier) due to perceived risk to free pricing