Accumulate Hindustan Petroleum Corporation Ltd For Target Rs.427 by Prabhudas Liladhar Capital Ltd
Q1FY27 GMM expected to remain under pressure
HPCL reported a GRM of USD14.3/bbl in Q4FY26 vs USD5.4/bbl in Q3FY26. Refining throughput stood at 6.4mmt, flat QoQ and down 4.6% YoY. Marketing sales volumes incl. exports increased 2.4% YoY but declined 2.5% QoQ to 13.0mmt, with implied GMM at INR6.2/lit (INR5.4/lit in Q3FY26). EBITDA (incl. forex loss of INR14.5bn) came in ahead of est. at INR89.8bn (+27.9%/+54.7% QoQ/YoY) (PLe INR43.7bn, BBGe INR39.3bn). Improved operational performance in FY26 drove EBITDA/PAT growth of 83.6%/133.2% YoY respectively to INR304.9bn and INR171.8bn respectively. As per HPCL, crude inventory is currently maintained at normal levels of ~60 days, with May & June’26 supplies fully secured, although at higher premiums. For July’26, supplies have already been secured until 15 July’26, while procurement for the remainder of month is ongoing. With no hike in RSP prices, MS and HSD marketing margins remain negative. We estimate GMM at INR2.1/lit and INR4.9/lit while build in GRM assumptions of USD7.3/bbl and USD7.1/bbl for FY27E/FY28E respectively. We value the company at 1.2x FY28E PBV (earlier: 1.1x) and maintain Accumulate rating with a revised target price of INR427 (earlier: INR421).
GRM improves YoY and QoQ:
Reported GRM increased to USD14.3/bbl, vs USD8.9/8.4/bbl in Q3FY26/Q4FY25. Improvement was led by higher crack spreads amid a volatile West Asia disruption. Refining throughput remained flat QoQ at 6.4mmt but declined 4.6% YoY from 6.7mmt in Q4FY25.
Marketing volumes improved YoY:
Implied GMM stood at INR6.2/lit, vs INR5.4/4.5/lit in Q3FY26/Q4FY25. Total sales volume, including exports, improved by 2.4% YoY, but declined -2.5% QoQ to 13.0mmt, as volumes across MS/HSD and LPG declined QoQ. MS/HSD/LPG volumes declined -2.3/-2.6-/9.1% QoQ.
LPG under-recovery compensated:
MoP&NG had approved INR79.2bn LPG underrecovery compensation to be disbursed in 12 equal monthly instalments starting Nov’25. HPCL received compensation of INR33bn in FY26 under ‘Sale of Products’. Cumulative negative buffer stands at INR128.0bn as of FY26
FY26 performance:
EBITDA and PAT improved 83.6% and 133.2% YoY respectively to INR304.9bn and 171.8bn respectively. GRM and throughput in FY26 improved 54.2%/3.0% YoY to USD8.8/bbl and 26mmt respectively. GMM improved 38.4% to INR6.1/lit, while marketing volumes improved 3.3% to 51.5mmt YoY.
Key concall takeaways:
(1) LPG update – loss/cyl Q4FY26 – INR84/cyl, April’26 – INR170/cyl and May’26- INR670/cyl. Some LPG supplies have now resumed from the Persian Gulf vs the initial phase of the conflict. LPG under-recoveries stood at INR52bn in FY26, including INR13.5bn in Q4FY26, against which HPCL received compensation totalling INR33bn.
2) Samriddhi program delivered savings of INR16.9bn in FY26 (vs guidance of INR15bn), which included INR9.5bn one-time savings and INR7.4bn of recurring savings. As a result, HPCL claims that opex/turnover declined to 1.45% in FY26 vs 1.54% in FY25 and opex/mt declined to INR13.4 vs INR14.4 YoY. HPCL also tightened capex and borrowing management, reducing debt through prudent working capital management (INR85bn reduction), leading to lower interest costs aided by refinancing and lower forex exposure.
3) Projects Update: RUF is progressing slower than planned, though the unit is back on stream and expected to ramp up gradually, with meaningful benefits likely by end-Q1FY27 or Q2FY27. At HRRL, operations were impacted by a residual leak in the CDU unit; however, MS and HSD production is expected to commence in the 2nd fortnight of May’26, with utilisation currently at ~60% and full ramp-up targeted by Q2FY27 Only 6 heat exchangers out of 600–800 were impacted. At Chhara, 90-95% of the breakwater construction is complete, with the terminal expected to operate at full capacity except during peak monsoon season.
4) Supply Update: Under normal conditions, secures ~2 months of crude supply through a mix of ~50% term contracts and the roughly 50% spot; however, it is currently relying more on spot cargoes while maintaining the same 60-day inventory cycle, although at a premium (~45–50 days -Vizag refinery and ~30–35 days - Mumbai refinery). Crude requirements for May’26 and June’26 are fully covered, with supply secured until 15 July’26. Procurement has become more geographically diversified post-crisis. Meanwhile, LPG procurement challenges continue to persist.
5) Capex Outlook: FY27 capex is expected to be slightly lower than FY26 levels, although spending could increase if the ongoing geopolitical situation normalizes sooner than expected. The company remains focused on completing HRRL, while discretionary capex is being curtailed.
6) Depreciation Update: Higher D&A in Q4FY26 was driven by capitalization of the RUF unit, with the entire RUF project now capitalized, along with an impairment charge of ~INR4.5bn.
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SEBI Registration No. INH000000271Accumulate Paradeep Phosphates Ltd For Target Rs.141 by Prabhudas Liladhar Capital Ltd
