HPCL hits 52-week high; stock surges 20% in two weeks on Q4 nos, oil slip

Shares of Hindustan Petroleum Corporation (HPCL) hit a 52-week high of Rs 330, up 4 per cent, after surging 20 per cent in two weeks on the BSE, lifted by strong earnings in March quarter (Q4FY19) and fall in crude oil prices. In comparison, the S&P BSE Sensex was up 5 per cent during the same period.

The stock surpassed its previous high of Rs 325 touched on June 18, 2018.

The oil prices fell to their lowest in nearly three months after US President Donald Trump said he would impose tariffs on imports from Mexico, stoking fears about global economy.

HPCL had reported 70 per cent year-on-year (YoY) growth in net profit at Rs 2,969 crore in Q4FY19, on account of a better-than-expected performance in the marketing segment. EBITDA (earnings before interest tax depreciation and amortization) increased 55 per cent YoY to Rs 4,660 crore in Q4FY19, supported by an inventory gain of Rs 920 crore.

The state-owned oil marketing company (OMC's) board has recommended final equity dividend of Rs 9.40 per share for the financial year 2018-2019.

“OMCs could not take any price hike to compensate for the rising product prices till mid-May in an election-packed environment. Now onwards, normative margins will be restored allowing HP to be the largest beneficiary as its earnings are highly sensitive to changes in the marketing margins,” analysts at HDFC Securities said in results review with ‘buy’ rating on the stock and target price of Rs 346 per share.

"Concerns around the ability of the OMCs to take price hikes amid elections are overdone and clarity over marketing margins would benefit HPCL the most, according to Motilal Oswal Securities. However, due to high capex (Vizag expansion and Rajasthan refinery-cum-petrochem complex), free cash flow is likely to remain negative in FY20", in our view, the brokerage firm said in result update.

“OMCs were able to get super-normal marketing margins in the last quarter. The intent of the new government and ability to pass on costs during high oil prices will determine the performance of OMCs, going forward. HPCL’s ability to maintain normal marketing margins and trend in refining margins will determine its near term performance,” according to analysts at ICICI Securities in result update.

Besides, HPCL, Bharat Petroleum Corporation (BPCL) and Indian Oil Corporation (IOCL) were up 3 per cent each at Rs 420 and Rs 169, respectively. In comparison, the S&P BSE Sensex was up 0.67 per cent at 40,101 points at 09:52 am.