HPCL shares surge 7%; stock up for 9th day. Here are analyst target prices for OMC

Shares of Hindustan Petroleum Corporation Ltd (HPCL) surged over 7 per cent in Wednesday's trade, as strong marketing inventory gains drove its September quarter earnings. The HPCL stock is up 23.46 per cent in what is emerging as nine-day winning streak. Analysts said HPCL's refining margins were in-line with expectations but higher marketing margins beat estimates.

Analysts said completion of various ongoing projects such as Bhatinda refinery expansion, expansion of Vizag refinery, and new Rajasthan (Barmer) refinery in May 2024 are expected to drive growth over the next three to five years.

Besides, "HPCL is working on petchem projects, including the establishment of a 4.6 mmtpa petrochemical capacity by FY25E through JVs. This strategic initiative aims to position the company as the second-largest petrochemical production facility in India," Motilal Oswal said. This brokerage sees HPCL stock at Rs 309.

The mechanical completion of Vizag refinery is expected to be completed by Jan-Feb 2024. Post expansion, the refinery will have the highest diesel yield in the country and the management expects incremental GRM of $3-4 per barre; on the commissioning of the bottom upgrade unit.

On Wednesday, the stock of state-run oil marketing company rose 7.35 per cent to hit a high of Rs 299.15 on BSE.

Emkay Global said HPCL’s Q2FY24 standalone Ebitda and profit figures were far better than its estimates, led by marketing inventory gains of Rs 1,200 crore at 14 per cent higher-than-expected implied marketing margins and 27 per cent lower-than-estimated other expenses.

"Marketing outperformance was similar to peers’, while reported GRM was lower at $13.3 per barrel against our estimate of $17. Gross/net debt was flat QoQ. HPCL operated Vizag refinery at 11mmtpa capacity in Q2, with 13.5/15mmtpa expected from Q3/early-2024. We raise FY24/25E EPS by 41 per cent/21 per cent, based on prevailing trends. We retain HOLD on the stock, and revise Sep-24E target price upwards (roll-over) by 13 per cent to Rs 305 per share," the brokerage said.

The HPCL management has guided for an annual capex runrate of Rs 14,000-15,000 crore for the coming five years while the phase-wise Barmer refinery commissioning is anticipated in 2024.

"We sharply raise standalone FY24F Ebitda by factoring in HPCL’s 1H performance; we raise Ebitda for FY25F by 3 per cent, FY26F by 8 per cent on factoring in higher refining margins of $7 per barrel and $7.5 per barrel. We retain our Neutral rating with a higher SoTP-based target of Rs 305 from Rs 270 previously) on roll over to Sep-25F EV/Ebitda," said Nomura India.

Also read: Cochin Shipyard, Zomato, CDSL, HAL & VBL: What Mileen Vasudeo of Arihant Capital says on these 5 stocks

Also read: Apollo Tyres shares rally 6% after strong performance in September quarter