MOSL: HPCL (Buy)-EBITDA significantly below estimate-Core GRM at USD5.6/bbl
​HPCL: EBITDA significantly below estimate; Core GRM at USD5.6/bbl
(HPCL IN, Mkt Cap USD10.1b, CMP INR420, TP INR579, 38% Upside, Buy)
- HPCL’s reported EBITDA of INR27.2b (+129% YoY, +76% QoQ) in 2QFY18 was significantly lower than our estimate of INR52.5b due to lower GRM and inventory gains. EBITDA adjusted for inventory gains stood at INR21.2b (+14% YoY, -34% QoQ), below our estimate of INR33.4b, led by lower core GRM (at USD5.6/bbl, significantly below benchmark SG GRM of USD8.3/bbl; our estimate: USD9/bbl; USD8.8/bbl in 1QFY18 and USD4.2/bbl in 2QFY17). HPCL reported total inventory gain of INR7.9b in 2QFY18 – inventory gain was ~INR4.5b (~USD2.05/bbl) in refining and INR3.4b in marketing. PAT rose 147% YoY (+88% QoQ) to INR17.3b (est. of INR31.9b), benefiting from higher other income of INR7b (est. of INR3.5b; +14% YoY, +7% QoQ).
- Core GRM stood at USD5.6/bbl, significantly lower than our estimate of USD9/bbl. Sub-optimal GRM can be attributed to monsoon-related lower offtake of bitumen, which led to higher production of fuel oil. We expect GRM improvement in the coming quarters.
- Marketing sales volume grew 9% YoY (-6% QoQ) to 8.7mmt in 2QFY18. Throughput grew 15% YoY (+3% QoQ) to 4.6mmt.
Hindustan Petroleum is engaged in the refining and marketing of petroleum products. Co. operates 2 major refineries producing a wide variety of petroleum fuels & specialties, one in Mumbai (West Coast) of 6.5 Million Metric Tons Per Annum (MMTPA) capacity and the other in Vishakapatnam, (East Coast) with a capacity of 8.3 MMTPA. Co. also owns and operates a Lube Refinery producing Lube Base Oils of international standards, with a capacity of 428 TMT. Co.'s marketing network is facilitated by a Supply & Distribution infrastructure comprising Terminals, Pipeline networks, Aviation Service Stations, LPG Bottling Plants, Inland Relay Depots & Retail Outlets, Lube and LPG Distributorships.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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