Hindustan Petroleum Corporation Limited Research Report

Industry

Market Price

Recommendation

Target

Time Horizon

Oil and Gas

237.60

295

Buy

1 Year

 

Q4 FY 2022 Review

Hindustan Petroleum Corporation Limited reported net revenue of ₹1,05,003.85 crores for the quarter ended March 31, 2022, compared to ₹84,965.89 crores for March 31, 2021. EBIT and Profit After Tax were ₹2,276.12 crores and ₹2018.45 crores for the quarter ended 31 March 2022, as compared to ₹4,261.98 crores and ₹3,060.70 crores during the corresponding quarter of the previous year.

 

Hindustan Petroleum Corporation Limited - Investment Summary

CMP (₹)

237.60

52 Week H/L

355/206

Market Cap (crores)

34,166

Face Value (₹)

10.00

Promoter Holding (%)

54.90

Non-Promoter Holding (%)

45.10

Total (%)

100.00

Book Value

₹292

EPS TTM

₹51.36

 

Hindustan Petroleum Corporation Limited – Overview

  • Hindustan Petroleum Corporation Ltd is primarily involved in the refining of crude oil and marketing petroleum products, the production of hydrocarbons, and the management of E&P blocks.

  • HPCL is the country's largest base oil producer, capable of producing Group I, Group II, and Group III base oils.

  • HPCL has a refining capacity share of 10.8%, and owns 21% of India’s petroleum product pipelines.

  • The company has been assigned AAA/Stable (Reaffirmed) credit rating on a long-term bank facility.

 

Hindustan Petroleum Corporation Limited Overview

 

Beta: 0.84

Alpha: -7.50

Risk Reward Ratio: 1.41

The margin of Safety: 19%

 

Hindustan Petroleum Corporation Limited - Quarterly Summary

Quarterly (INR in lakhs)

Mar-22

Dec-21

Sep-21

Jun-21

Mar-21

Revenue from Operations

1,05,350.49

1,03,488.75

87,654

77,634

85,264.77

 

         

Other income

1183.35

477.75

431

347

490

Total Income

1,06,534

1,03,966.5

88,085.42

77,980

85,754.76

 

         

Total Expenditure

1,04,257.72

1,02,671.29

85,587.42

75,366.59

81,492.78

EBIT

2,276

1,295

2,498

2,614

4,262

 

         

Finance cost

335

244

159

259

225

EBT before exceptional Items

1,941

1,051

2,339

2,354

4,037

 

         

Share in P&L of Joint Ventures

562

578

18

300

32

PBT

2,503

1,629

2,356

2,655

4,070

 

         

Tax Expenses

484.77

276

437.56

650.64

1,009.05

PAT

2,018

1,353

1,919

2,004

3,061

 

Business
  • HPCL is a petroleum oil refining and marketing conglomerate. It has significant oil marketing operations and is India's third-largest oil refining and marketing company.

  • The company has a total refining capacity of 21.5 MMTPA, comprised of Coastal refineries in Mumbai and Vishakhapatnam.

  • HPCL is setting up a grass-root Greenfield refinery-cum-petrochemical complex with a 9 MTPA in Barmer through HPCL Rajasthan Refinery Ltd, a JV with the Government of Rajasthan.

  • Through a joint venture with Singapore-based Mittal Energy Investments Pvt Ltd, the company also operates an 11.3 MMTPA refinery in Bathinda, Punjab.

  • HPCL Refinery Capacity

    Total Capacity

    21.5 MMTPA

    Mumbai

    7.5 MMTPA

    Vishakhapatnam

    8.3 MMTPA

    Bhatinda

    5.65 MMTPA

  • Out of the total revenue generated, 99.91% has been generated from Downstream Petroleum activities, whereas 0.09% has been generated from other activities in FY 2022, which is at par when compared to FY 2021.

    HPCL Segment Wise Revenue Breakdown

  • As of 2022, the company has 20,183 retail outlets, 6,249 LPG Distribution, 6 Lube blending plants, and 275 Lube distributers.

  • As of March 2022, the company has achieved market sales of 39.14 MMT and a refining throughput of 13.97 MMT (Metric Tonne).

 

Hindustan Petroleum Corporation Limited - Revenue Trend

Topline and Bottomline trend (crores)

Hindustan Petroleum Corporation Limited Topline and Bottomline trend

 

Hindustan Petroleum Corporation Limited EBIT Margin

 

Hindustan Petroleum Corporation Limited Shareholding Pattern

 

HPCL Major Shareholders

 

Ratio Analysis

 

Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

Profitability Ratio

 

 

 

 

 

Gross Profit

79.60%

77.00%

79.76%

84.50%

82.07%

EBITDA Margin

5.01%

4.37%

2.55%

6.89%

3.39%

EBIT Margin

3.85%

3.33%

1.38%

5.55%

2.32%

Pre-Tax Margin

4.14%

3.38%

0.48%

5.25%

2.44%

Net Profit Margin

2.96%

2.25%

0.92%

3.94%

1.95%

 

 

 

 

 

 

Return on Investment

 

 

 

 

 

Return on Asset – ROA

 

6.79%

2.35%

8.49%

5.05%

Return on Capital Employed – ROCE

 

21%

7%

23%

11%

Return on Equity – ROE

 

23.92%

8.60%

30.88%

18.35%

 

 

 

 

 

 

Liquidity Ratio

 

 

 

 

 

Current ratio (x)

0.77

0.76

0.66

0.71

0.70

Quick Ratio

0.377

0.403

0.320

0.247

0.198

 

 

 

 

 

 

Turnover Ratio

 

 

 

 

 

Receivables Turnover

 

6.91

6.09

7.29

6.44

Inventory Turnover

 

102.10

121.15

196.90

168.70

Payables Turnover

 

86.04

87.15

114.84

112.99

Asset Turnover

 

2.57

2.16

2.59

#DIV/0!

 

 

 

 

 

 

Solvency Ratio

 

 

 

 

 

Debt to Equity

0.38

0.40

0.75

0.66

0.78

Interest Coverage Ratio

12.6

3.5

15.59

8.71

8.71

 

Hindustan Petroleum Corporation Limited - Financial Overview

Profit and Loss Statement (₹ in crores)

 

Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

Revenue

2,44,262.34

2,97,222

2,87,742.05

2,70,577

3,74,126

Other income

1,527.88

1,453.12

1,681.62

2,643.73

2,438.92

Total Revenue

2,45,790.22

2,98,675

2,89,423

2,73,221

3,76,565

           

Cost of Material Consumed

51,365.48

69,808.7

59,906.49

44,572.77

69,536.18

Gross Profit

1,94,424.74

2,28,866

2,29,517.18

2,28,648

3,07,029

           

Purchases of Stock-in-Trade

1,42,455.74

1,80,570

1,87,234

1,64,500

2,53,220

Changes in Inventories of Finished Goods, Stock-in-Trade and Work-in-Progress

666

-2,224.2

-354.51

-8,518.53

-625.88

Excise Duty

24,752.47

21,731.6

18,650.52

37,329.51

24,213.81

Employees Benefits Expenses

2,892.57

2,971.24

3,224.06

3,219.42

3,017.35

Other Expenses

11,417.13

12,837.1

13,418.87

13,470.67

14,520.53

EBITDA

12,240.83

12,980.4

7,344.11

18,647.09

12,683.25

           

Depreciation, Amortisation, and Impairment

2,834.40

3,085.30

3,369.87

3,625.47

4,000.36

EBIT

9,406.43

9,895.11

3,974.24

15,021.62

8,682.89

           

Finance cost

617.88

785.64

1,138.85

963.28

997.32

EBT before Exceptional Items

8,788.55

9,109.47

2,835.39

14,058.34

7,685.57

           

Share in Profit of Joint Ventures and Associates

1,321.59

929.73

-458.17

138.66

1,458.05

Exceptional items

   

-1,002.93

   

EBT

10,110.14

10,039.2

1,374.29

14,197.00

9,143.62

           

tax expenses

2,891.86

3,348.57

-1,264.44

3,534.11

1,849.39

PAT before Non-Controlling Interest and non-perpetual Securities

7,218.28

6,690.63

2,638.73

10,662.89

7,294.23

EPS

         

Basic

47.37

43.90

17.32

70.56

51.42

Diluted

47.37

43.90

17.32

70.56

51.42

           

Number of shares

         

Basic

152.38

152.39

152.38

151.11

141.85

Diluted

152.38

152.39

152.38

151.11

141.85

 

Cash Flow Statement (₹ in crores)

 

Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

Net Profit Before Tax

10,110.14

10,039.20

1,374.29

14,197.00

9,143.62

Net Cash from Operating Activities

11,037.21

8,554.03

5,469.24

17,829.26

15,810.23

Net Cash Used for Investing Activities

-7,397.96

-11,381.74

-14,167.89

-12,278.59

-13,744.84

Net Cash From (Used For) Financing Activities

-4,422.96

2,598.21

8,451.96

-4,709.19

-2,066.24

Net Increase in Cash and Cash Equivalents

-783.71

-229.50

-246.69

841.48

-0.85

Cash And Cash Equivalents at The Beginning of The Year

-1,652.23

-2,435.94

-2,665.44

-2,912.13

-2,070.65

Cash And Cash Equivalents at The End of the Year

-2,435.94

-2,665.44

-2,912.13

-2,070.65

-2,071.50

 

Balance Sheet (₹ in crores)
 

Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

ASSETS

         

Non-Current Assets

         

Property, Plant & Equipment

38,225.68

41,168.63

48,391.57

49,950.58

56,982.17

Capital Work-in-Progress

3,989.02

9,495.91

17,047.34

25,128.63

28,645.09

Goodwill on Consolidation

16.69

16.69

16.69

321.62

321.62

Other Intangible Assets

452.77

456.18

543.52

639.71

822.31

Intangible Assets under development

21.51

22.82

122.42

207.4

262.15

Investment in Joint Ventures and Associates

7,306.57

8,715.69

8,820.82

9,333.88

12,840.27

Financial Assets:

         

Other Investments

576.05

498

229.93

341.96

655.56

Loans

712

1,141.43

1,409.48

846.24

925.89

Other Financial Assets

2.67

1.67

6.29

149.36

145.55

Other non-current assets

1,835.71

2,339.46

2,702.07

3,069.43

3,277.73

Total Non-Current Assets

53,138.67

63,856.48

79,290.13

89,988.81

1,04,878.34

           

Current Assets

         

Inventories

18,612.23

20,443.62

19,325.99

28,763.90

35,514.71

Financial Assets:

         

Investments

4,999.38

5,083.76

5,344.86

5417.58

5,371.52

Trade Receivables

5,587.02

5,667.79

3,934.19

6,869.99

6,340.31

Cash and cash equivalents

121.52

198.74

204.76

480.38

233.85

Bank balances other than cash and cash equivalents

1,168.13

19.76

18.36

94.54

24.12

Loans

331.04

850.83

409.86

126.3

155.18

Other Financial Assets

5,382.96

10,540.11

7,970.43

1,794.45

1,508.00

Other Current Assets

327.31

677.15

401.24

625.23

541.65

Total Current Assets

36,529.59

43,481.76

37,609.69

44,172.37

49,689.34

Assets Classified as Held For Sale

3.49

8.24

10.07

12.67

60.51

Total Assets

89,671.75

1,07,346.48

1,16,909.89

1,34,173.85

1,54,628.19

           

EQUITIES & LIABILITIES

         

Equity

         

Equity share capital

1,524.21

1,524.21

1,524.21

1,452.41

1,418.94

Other equity-

24,008.23

28,876.45

29,456.41

36,628.45

39,985.27

Equity attributable to owners of the company

25,532.44

30,400.66

30,980.62

38,080.86

41,404.21

           
           

Total Equity

25,532.44

30,400.66

30,980.62

38,080.86

41,404.21

           

Liabilities

         

Non-Current Liabilities

         

Financial Liabilities

         

Borrowings

9,655.94

12,127.80

23,109.63

25,049.19

32,115.28

Lease Liabilities

     

2,715.23

3,150.74

Other financial liabilities

0.47

0.51

0.70

32.63

53.25

Provisions

79.27

58.41

54.62

36.8

50.73

Deferred Tax Liabilities

6,804.82

7,396.25

5,491.44

5,462.21

5,957.71

other non-current liabilities

35.85

152.95

224.83

382.48

456.7

Total Non-Current Liabilities

16,576.35

19,735.92

28,881.22

33,678.54

41,784.41

           

Current Liabilities

         

Financial Liabilities

         

Borrowings

10,879.42

13,908.68

16,276.12

15,634.65

12,863.45

Lease Liabilities

     

309.66

368.28

Trade Payables

15,779.96

17,133.37

11,472.55

16,576.04

26,477.33

Other Financial Liabilities

14,567.21

19,534.61

23,385.91

20,988.94

22,538.89

Provisions

2,436.26

2,082.18

2,630.56

2,847.07

2,486.70

Other Current Liabilities

3,603.95

3,719.79

2,915.94

5,706.37

6,437.49

Current tax liabilities (Net)

296.16

831.27

366.97

351.72

267.43

Total Current Liabilities

47,562.96

57,209.90

57,048.05

62,414.45

71,439.57

           
           

Total Equity and Liabilities

89,671.75

1,07,346.48

1,16,909.89

1,34,173.85

1,54,628.19

 

Industry Overview
  • Oil refining and marketing are essential for India's economic development. The domestic market for key petroleum products such as motor spirits, high-speed diesel, superior kerosene oil (SKO), and liquefied petroleum gas is dominated by oil marketing companies (OMCs) (LPG).

  • Crude oil prices have been volatile in recent years. Prices fell sharply to around USD 20 per barrel (bbl.) near the end of March 2020, then recovered to pre-pandemic levels, averaging around USD 64 per bbl. by the end of fiscal 2021. The ongoing geopolitical tensions have pushed crude oil prices above $100/bbl once more.

  • India's current refining capacity is 249 MMTPA, with 23 refineries -19 in the public sector, three in the private sector, and one in a joint venture. With a capacity of 80.5 MMTPA, Indian Oil Corporation (IOC) is the largest domestic refiner.

  • India's oil demand is expected to double, reaching 11 million barrels per day by 2045

  • Diesel demand in India is expected to double to 163 MT by 2029-30, with diesel and gasoline accounting for 58% of total oil demand in India by 2045.

  • By 2040, gas consumption is expected to reach 143.08 BCM. The government intends to invest $2.86 billion in upstream oil and gas production by 2022 in order to double natural gas production to 60 BCM and drill more than 120 exploration wells.

  • According to the International Energy Agency (IEA), India's medium-term natural gas consumption outlook remains positive due to expanding infrastructure and supportive environmental policies. Industrial consumers are expected to account for 40% of net demand growth in India. Residential, transportation, and energy sectors are also expected to drive demand.

  • The Department for Promotion of Industry and Internal Trade (DPIIT) approved an order in July 2021, allowing 100% FDIs under the automatic route for oil and gas PSUs.

 

Hindustan Petroleum Corporation Limited - Technical Analysis

Hindustan Petroleum Corporation Limited Technical Analysis

 

  • Stock is trading near EMA 200 and MA 200 indicators, with a strong support level of ₹230 and a resistance level at ₹336.

  • One can accumulate this share at the current price.

 

Recommendation Rationale:
  • For the FY22, Hindustan Petroleum Corporation Limited’s revenue increased to ₹3,74,126 crores, compared to the previous year at ₹2,70,577. It also registered a net Profit After Tax of ₹7,294.23 crores compared to the last year at ₹10,662.89 crores.

  • Given its role in India's economic development, HPCL remains strategically important to the Government of India (GoI). HPCL's strategic importance and the expectation of continued support from the Government of India and its parent company, Oil and Natural Gas Corporation (ONGC), ensure the smooth supply of resources.

  • The company has generated positive EPS of ₹70 and ₹51 in the last couple of years.

  • For the past few years, the company has reported above-capacity utilization levels of refineries of more than 100%.

  • From FY21 to FY23, the company has aggressive CAPEX plans worth 39,000 crores INR, including equity investments of 7,200 crores in JVs.

  • Its major CAPEX projects are as follows:

    • Modernization and expansion of its refineries in Mumbai and Visakhapatnam. It intends to increase the capacity of the Mumbai refinery to 9.5 MMTPA and the Visakhapatnam refinery to 15 MMTPA.

    • Rajasthan refinery/petrochemical complex (74% stake).

    • Gujarat LNG terminal (50% stake).

  • HPCL has installed a captive solar power capacity of 11.4 MWp across various locations to increase renewable energy consumption, bringing total solar power capacity to 43.95 MWp.

  • Oil and Natural Gas Corporation Ltd purchased a 51% stake in HPCL from the Government of India in January 2018 for 37,000 crores.

 

Valuation
  • The company’s revenue has increased at a CAGR of 11.25% from FY 2019-to 2022.

  • For 2022, the company’s ROE and ROCE were 18.35% and 11%.

  • Q1FY2023 results could get impacted due to the fluctuating oil prices amid the war tension and the increase in the inflation level.

  • Based on the performance of the company in FY22, we expect the company could post higher revenue for the current financial (2023), corresponding to the previous year.

  • We have taken data for the last five years (2018-2022) and forecasted revenue for FY 2023-2027. Revenue growth is assumed to be 7%.

 

Estimated Income Statement (₹ in crores):

 

Mar-23

Mar-24

Mar-25

Mar-26

Mar-27

 

2023-E

2024-E

2025-E

2026-E

2027-E

Revenue

4,02,803.58

4,30,875.44

4,60,909.85

4,93,044.13

5,27,425.22

COGS

74,564.08

76,652.13

84,190.34

89,728.96

95,433.89

Gross Profit

3,28,239.50

3,54,223.31

3,76,719.52

4,03,315.17

4,31,991.34

Employee Expenses

3,995.82

3,865.05

4,355.21

4,542.58

4,923.42

Other Expenses

3,02,023.34

3,20,781.28

3,49,490.05

3,69,946.82

3,96,558.99

EBITDA

22,220.33

29,576.99

22,874.26

28,825.77

30,508.92

Depreciation

4,658.09

5,539.34

6,443.15

7,373.85

8,335.90

EBIT

17,562.24

24,037.65

16,431.11

21,451.92

22,173.02

Financial Cost

2,017.21

2,760.97

1,887.28

2,463.98

2,546.80

EBT

15,545.04

21,276.67

14,543.83

18,987.94

19,626.22

Tax expenses

3,144.14

4,303.42

2,941.64

3,840.50

3,969.60

PAT

12,400.89

16,973.25

11,602.19

15,147.44

15,656.62

 

  • We initiate coverage on Hindustan Petroleum Corporation Limited with a “BUY” and a 1-year Target Price of 295.

 


Disclaimer: This report is only for the information of our customer Recommendations, opinions, or suggestions are given with the understanding that readers acting on this information assume all risks involved. The information provided herein is not to be construed as an offer to buy or sell securities of any kind.

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DISCLAIMER

This report is only for the information of our customers. Recommendations, opinions, or suggestions are given with the understanding that readers acting on this information assume all risks involved. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. ATS and/or its group companies do not as assume any responsibility or liability resulting from the use of such information.

 

 

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