Should you buy the dip?

Considering high crude price volatility, HPCL shares have received mixed reviews from brokerage houses post its September quarter earnings. As many as 7 analysts have given long term price targets for HPCL. The average target price is ₹253.57, an upside of 24.7% from Thursday’s closing price of ₹203.35, as per Trendlyne data.

ICICI Securities assigns “REDUCE” rating

Domestic brokerage house ICICI Securities said that HPCL’s Q2FY23 operating performance was weaker-than-expected, with a recurring EBITDA loss of ₹7,120 crore and net loss of ₹7,790 crore against its estimates of ₹7,130 crore and ₹8,080 crore, respectively.

“FY23E prospects appear muted despite the forecast of double-digit GRMs, given negligible marketing earnings to offset this advantage. FY24E is likely to see a sharper recovery, with around 3x increase in refining throughput, thanks to the commissioning of ~7mtpa Vizag refinery, 4-5mtpa Rajasthan refinery (50% share), and the expected MRPL merger (~12mtpa) apart from some revival in marketing margin,” it said in a report.

The brokerage remains cautious on the stock due to the sharp increase in leverage and decline in return ratios and reiterated the “REDUCE” rating with a target price of ₹186 per share.

Prabhudas Lilladher maintains ‘HOLD’ rating

Analysts at Prabhudas Lilladher have maintained a ‘HOLD’ rating at a price target of ₹195 (unchanged), saying that any sharp correction in crude prices is an upside risk to its estimates. “We believe OMCs earnings will be hit by a sharp jump in diesel marketing losses (current diesel loss at Rs10/litre) given low inventory, gas to oil switch (because of high spot LNG prices), and drop in Russian exports (despite improvement in refining profitability).”

As per the agency, one time grant of LPG subsidy cushioned earnings, while it expects the slowdown in global inventory and lower exports from Russia to support GRMs.

HPCL Q2

HPCL shares fall 5% post Q2; should you buy the dip?