Company Update : Hindustan Petroleum Corporation Ltd By Motilal Oswal Financial Services Ltd
Beat fueled by robust refining performance
* HPCL’s 4QFY25 EBITDA was 61% above our est., fueled by higher-thanestimated GRM (USD8.5/bbl). Marketing margin, though weaker than BP/IOC, stood in line with our estimates at INR4.5/lit. Resultant PAT stood 114% above our est. at INR33.5b.
* In 4QFY25, LPG under-recovery amounted to INR33b (similar QoQ). With effect from 8th Apr’25, the price of LPG cylinders has been hiked by INR50 for both subsidised and non-subsidised users. The government also increased Excise Duty on both Petrol (MS) and Diesel (HSD) by INR2/lit from the same day.
* Singapore GRM averaged USD3.7/bbl in Apr’25 (vs. USD3.2/bbl in 4QFY25). We have a bearish stance on refining over FY26-1HFY28 amid strong ~2.5- 3mb/d net refinery capacity additions globally over CY24-26 and demand worries due to rising trade tensions and possibilities of global macroeconomic slowdown. Even after excise duty hikes, current MS/HSD marketing margins continue to average above INR10/lit.
* HPCL currently trades at 1.4x 1yr. fwd. P/B, slightly above its 10Y average P/B. We have a Buy rating on HPCL.
Financial performance – 4QFY25
* HPCL’s EBITDA stood at INR57.6b in 4QFY25 (61% beat).
* The beat was driven by higher-than-estimated GRM, which was 55% above our estimate at USD8.5/bbl.
* Refining throughput was in line with our estimate at 6.7mmt. Marketing volumes stood at 12.7mmt (est. 12.5mmt).
* Marketing margin (including inv.) stood at ~INR4.5/lit (est. INR4.6/lit).
* LPG under-recovery stood at INR33b (similar QoQ), which we believe could be reversed in due course as LPG remains a controlled product.
* PAT came in 114% above our est. at INR33.5b. Other income and finance costs were below our estimates.
* In 4Q, HPCL had a forex gain of INR468m.
* In FY25, HPCL’s SA net sales were flat YoY at INR4.3t, while EBITDA/RPAT declined 32%/50% to INR171b/73.7b.
* As of Mar’25, HPCL had a cumulative negative net buffer of INR109b, due to the under-recovery on LPG cylinders (INR76b as of Dec’24).
* As of Mar’25, gross debt stood at INR633.2b (up INR93b QoQ).
* The Board recommended a final dividend of INR10.5/sh (FV: INR10/sh).
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