HPCL's 70% jump in Q4 profit fails to excite Street; here's why

NEW DELHI: Shares of Hindustan Petroleum Corporation (HPCL) declined over 4 per cent in morning trade on Tuesday even as the company reported a 69.91 per cent year-on-year rise in profit at Rs 2,969.92 crore for the quarter ended March 31.

Ebitda of the company jumped 76.76 per cent to Rs 5,166.3 against Rs 2,922.7 crore. Margins improved to 7.10 per cent in Q4FY19 over 4.40 per cent in Q4FY18.

The numbers seem to have failed to excite the market. Brokerages have mixed views on the stock after the March quarter numbers.


Global brokerage CLSA maintained its sell recommendation on the stock with a target price of Rs 210, highlighting that the marketing margin for petrol and diesel were below fair levels.

Nomura retained its 'neutral' view on the stock with a target price of Rs 260 while underscoring that the refining margin of the company remained weak. The brokerage believes oil marketing companies (OMCs) will soon revert to normal price changes.

YES Securities has a hold recommendation on the stock with a target price of Rs 275. With crude oil prices on a firm trajectory on the back of rising geopolitical tensions in the Middle East, risks of subsidy burden on OMCs have been rising, the brokerage said.

"We believe, that the stock adequately prices the current volatile environment at FY21E P/E of 6.8 times (a discount to IOC and BPCL)," YES Securities said.

On the other hand, Deutsche Bank held a buy recommendation on the stock with a target price of Rs 335 as the financial firm thinks the company's marketing segment offset its weak refining performance. Deutsche Bank justified its buy call on the stock on improving auto-fuel marketing margin and sale volume growth.

Shares of HPCL closed 2.90 per cent down at Rs 285.10 on BSE.