HPCL rallies 8%, hits 52-week high on strong March quarter results

Shares of Hindustan Petroleum Corporation (HPCL) rallied 8 per cent and hit a 52-week high of Rs 288.15 on the BSE in intra-day trade on Friday after reporting many-fold jump in its March quarter (Q4FY21) net profit to Rs 3,018 crore on the back of inventory gains and rise in refining margins. The state-owned oil marketing company had a net profit of Rs 27 crore in January-March 2020 (Q4FY20).

The company announced final dividend of Rs 22.75 per share, translating to dividend yield of 9 per cent for FY21. It also completed its share buyback program on April 20, 2021.

“HPCL’s marketing sales volumes were 9 per cent above est. at 10.1mmt (+6 per cent YoY). The marketing margin stood at Rs 6/lit (v/s our est. of Rs 5.2; +64 per cent YoY and +15 per cent QoQ)”, Motilal Oswal Securities said.

The company earned $8.11 on turning every barrel of crude oil into fuel in the January-March period. This is compared with a negative gross refining margin (GRM) of $1.23 per barrel (BBL). Average GRM during the year ended March 31, 2021 was $3.86 per BBl as against US 1.02 per BBl during the corresponding previous year.

Inventory gains are booked when raw material (crude) prices rise by the time a company processes oil into fuel. Losses are booked when the reverse happens.

“HPCL reported a significant EBITDA beat on much higher inventory gains in refining and marketing than we expected. Marketing volume growth was sharply ahead of industry growth. Marketing profitability is likely to be restored as crude cools and retail price hikes continue. Despite a 3.2x y/y jump in OCF, borrowings were flat due to a large increase in inventories and back-ended capex. We cut earnings 3 per cent/5 per cent forFY22/23E on ongoing restrictions, maintain Buy,” analysts at Jefferies said in results update.

At 09:34 am, HPCL was trading 5 per cent higher at Rs 280 on the BSE, as compared to 0.8 per cent rise in the S&P BSE Sensex. The trading volumes on the counter nearly doubled with a combined around 15 million equity shares changing hands on the NSE and BSE.

Hindustan Petroleum Corporation Ltd.(HPCL)