MOSL: HPCL (Neutral)-Project execution risk gaining materiality
HPCL: Project execution risk gaining materiality
(HPCL IN, Mkt Cap USD5.8b, CMP INR303, TP INR295, 3% Downside, Neutral)
- HPCL reported an EBITDA in line with our estimate on the back of lower than estimated refining throughput (at 2.5mmt, 6% lower than our estimate), despite the marginal beat on GRM (USD2.4/bbl) and marketing margins (INR5.8/liter).
- Refining performance was below our estimate due to delay in the ramping up of the Mumbai refinery after it was shut down for expansion. It is now complete, with the utilization rate at 80% currently; although expect some more time for ramp up to materialize. The management expects 100% utilization in 4QFY22.
- Lower refinery run-rates led to higher fuel and loss, offsetting better product spreads in 2QFY22. SG GRM has improved to USD7.5/bbl in Oct'21, although a slower ramp up at the Mumbai refinery may keep margin under pressure in the short term.
- The Visakhapatnam refinery is running at over 100% capacity utilization. Expansion of the same is likely to be completed by Dec'21, with meaningful contribution likely from 2QFY23. Bottom upgradation would see benefits from 4QFY23. The ramp up at Visakhapatnam would face higher challenges as the slurry hydrocracker is a relatively new technology, without a large number of commercial installations.
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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