Hindustan Petroleum Corporation Ltd (HPCL) shares rallied over 9% to hit a new 52-week high of Rs 417.25 on the BSE today. The stock has been gaining for the last three days and has risen 14% during the period.
Detailed Analysis Behind the Surge
Shares of state-owned oil marketing company HPCL have been in focus recently after the company posted a stellar 377% year-on-year rise in consolidated net profit at Rs 5,826 crore for the September quarter compared to Rs 1,2133 crore profit in the corresponding quarter last year.
The company’s gross sales also increased by 29.5% to Rs 1.15 lakh crore compared to Rs 88,939 crore in Q2 FY23. This strong performance was driven by robust growth in refining and marketing margins.
HPCL operates refineries in Mumbai and Visakhapatnam with a combined capacity of 15.8 million metric tonnes per annum (MMTPA). The company has a market share of 21% in India’s petroleum product market with a strong network of 23 oil terminals and depots, 50 LPG bottling plants, and 16,476 petrol pumps across the country.
Despite the recent uptick, HPCL stock is still attractively valued trading at a TTM P/E of just 2.17 compared to the sector average of 7.96. The company’s balance sheet is also stable with debt/equity of 1.29.
The positive sentiment around the stock is also reflected in analyst recommendations. As per data compiled from various brokerage reports, out of 31 analysts covering the stock, 18 have ‘Buy’ ratings which include 9 ‘Strong Buy’ and 9 ‘Buy’ recommendations. Only 5 analysts have ‘Sell’ ratings on the stock.
HPCL also enjoys strong institutional backing. FII holding in the company stood at 13.26% while mutual fund holding was at 7.90% as of September 2022 quarter. Promoter holding is also high at 54.90% giving confidence to investors.
Outlook and Trading Strategy
The outlook for HPCL remains positive backed by strong fundamentals. With the reopening of economies globally, demand for petroleum products is expected to remain firm.
The expansion of its refining capacity will also boost growth prospects. Margin expansion due to inventory gains and rupee depreciation provides further upside.
From a technical perspective, HPCL stock has given a breakout above Rs 400 levels which is a positive sign. The short term trend looks bullish with the stock trading above all key moving averages.
Investors can look to buy the stock on dips for a target of Rs 450-500 in the next 3-6 months. Maintain a stop loss at Rs 380 on a closing basis. The risk-reward ratio looks favorable. However, one needs to be a bit cautious at current valuations.
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Table Comparing Key Metrics and Financials
| Hindustan Petroleum Corporation share Key Metrics | |
| Market Cap (₹ Cr.) | 54,167.27 |
| Beta | 1.10 |
| Div. Yield (%) | 0.00 |
| P/B | 1.68 |
| D/E | 1.29 |
| Open Price | 386.45 |
| TTM P/E | 2.17 |
| Peg. Ratio | -0.13 |
| Sector P/E | 7.96 |
| Prev. Close | 381.80 |
Financial History
| Period | Mar 2023 | Mar 2022 | Mar 2021 | Mar 2020 |
| Total Revenue | 4,66,498.61 | 3,74,126.99 | 2,70,577.96 | 2,87,742.05 |
| Selling/ General/ Admin Expenses Total | 17,438.55 | 16,639.79 | 15,566.04 | 14,601.38 |
| Depreciation/ Amortization | 4,411.45 | 4,000.36 | 3,625.47 | 3,369.87 |
| Total Operating Expense | 4,76,256.27 | 3,67,837.24 | 2,58,148.90 | 2,85,532.17 |
| Operating Income | -9,757.66 | 6,289.75 | 12,429.06 | 2,209.88 |
| Net Income Before Taxes | -9,983.92 | 9,143.62 | 14,197.00 | 1,374.29 |
| Net Income | -6,980.23 | 7,294.23 | 10,662.89 | 2,638.73 |
| Diluted Normalized EPS | -48.46 | 50.57 | 70.82 | 21.51 |
In summary, HPCL stock is in a strong uptrend supported by robust quarterly results, attractive valuations and positive analyst outlook. Investors can consider buying the stock on dips for good upside potential in 2023.