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MOSL: Morning India (9/August/18): 1. HPCL; 2. BPCL; 3. Cipla; 4. Lupin; 5. Siemens; 6. NMDC; 7. Mphasis; 8. AU Small Finance; 9. Indian Bank; 10. Thermax

MOrning India (9/August/18): 1. HPCL; 2. BPCL; 3. Cipla; 4. Lupin; 5. Siemens; 6. NMDC; 7. Mphasis; 8. AU Small Finance; 9. Indian Bank; 10. Thermax

 

Today’s top research idea

HPCL: Adj. EBITDA significantly below estimate; Core GRM at USD3.7/bb

• EBITDA of INR37b (+129% YoY, +28% QoQ) was above our estimate of INR29b.
• However, total inventory gain stood at INR19b (est. of INR3.4b) - refining inventory gain stood at INR7.7b (USD3.43/bb) and marketing gain at INR11.4b. Adjusting for the same, EBITDA stood at INR18b (est. of INR25b; -43% YoY, -34% QoQ), significantly below our estimate due to a poor core GRM. PAT stood at INR17.2b (est. of INR15.2b; +86% YoY; -2% QoQ), impacted by a forex loss of INR5.4b during the quarter.
• We value refining and marketing at 6x FY20 EV/EBITDA and pipeline at 7.5x FY20 EV/EBITDA to arrive at a target of INR428. Reiterate Buy.

Piping hot news

Airlines may get nod to tap foreign loans; govt mulls external borrowing

• Distressed Indian airlines may get a new line of funding from foreign lenders, as the government is mulling opening up the external commercial borrowing (ECB) route for them to raise working capital. The civil aviation ministry has sought the intervention of the finance ministry to allow airlines to tap foreign funds. “Airlines, in their correspondence with the government, have requested that since aviation has become a primary mode of transport and an essential part of the infrastructure, they should be given benefits such as access to ECB for working capital.