MOSL: HPCL (Buy)-EBITDA significantly below estimate-core GRM at USD6.1/bbl
HPCL: EBITDA significantly below estimate; core GRM at USD6.1/bbl
(HPCL IN, Mkt Cap USD9.5b, CMP INR395, TP INR530, 35% Upside, Buy)
- HPCL’s reported EBITDA of INR31.6b (+7% YoY, +9% QoQ) in 3QFY18 was higher than our estimate of INR27.9b. However, EBITDA adjusted for inventory gains stood at INR16.9b (-8% YoY, -20% QoQ), much below our estimate of INR23.2b, primarily led by lower core marketing margin and GRM. HPCL reported total inventory gain of INR14.8b in 3QFY18: INR6.4b (~USD2.94/bbl) in refining and INR8.4b in marketing. The quarter witnessed a forex gain of INR2.7b. PAT rose 11% YoY (+12% QoQ) to INR19.5b (est. of INR14.7b).
- Core GRM stood at USD6.1/bbl, lower than our estimate of USD7.1/bbl. GRM in 3QFY17 and 2QFY18 stood at USD3.9/bbl and USD5.6/bbl, respectively. After declining from USD7.3/bbl in 3QFY18 to USD6.2/bbl in Jan’18, SG GRM has been hovering at ~USD7/bbl over the past few days. We build in GRM of USD6.5/bbl in FY19-20.
- Marketing sales volume grew 2% YoY (+8% QoQ) to 9.4mmt in 3QFY18. Refining throughput stood at 4.5mmt in the quarter v/s 4.7mmt in 3QFY17 and 4.6mmt in 2QFY18. Implied gross marketing margin including inventory has declined 21% YoY (-19% QoQ) to INR3.1/lit. Implied core gross marketing margin has declined 29% YoY (-33% QoQ) to INR2.3/lit.
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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