Hold Hindustan Petroleum Corporation; target of Rs 342: Prabhudas Lilladher

Moneycontrol • 6 days ago

Original source

Key Investment Pillars

  • Refining performance: HPCL's standalone EBITDA turned positive at INR90.7bn, beating street estimates, supported by strong operational performance and modest inventory gains.
  • GRM improvement: Pre-SAED GRM improved to USD32.2/bbl from USD23.8/bbl in Q1FY27, driven by elevated crack spreads amid West Asia disruptions and continued Ukrainian attacks on Russian refineries.
  • Debt reduction: Standalone debt/equity ratio improved to 1.4x in Q2FY27 from 1.5x in Q1FY27, with a decline in outstanding debt to INR654.6bn from INR725.97bn QoQ.
  • HRRL operations: HRRL is currently operating at 55-60% utilization and is expected to operate at full capacity by end-Q3FY27, with Q2FY27 GRM (net of SAED) standing at USD12/bbl.

Thesis Validation Checklist

To validate the 'Hold' thesis, investors should watch for: refining throughput, marketing sales, GRM, and debt/equity ratio over the next 12 months. Key signals include: operational performance, inventory gains, and management's ability to maintain a healthy balance sheet. Additionally, investors should monitor the progress of HRRL operations and the impact of geopolitical tensions on crude prices.