HPCL slips 4%, nears 52-week low on net loss in September quarter

Shares of Hindustan Petroleum Corporation Limited (HPLC) slipped 4 per cent to Rs 203.55 on the BSE in Friday’s intra-day trade after the oil marketing company posted a consolidated net loss of Rs 2,172.14 crore in Q2FY23 (2022-23). The stock was now trading closer to its 52-week low of Rs 200, recorded on October 20, 2022.

The state-owned oil marketing company reported the second straight quarterly loss despite revenue rising 30 per cent to Rs 1.13 trillion. It had posted a consolidated net profit of Rs 1,923 crore in Q2FY22.

The company blamed depressed marketing margins on motor fuels and LPG as the main reason for its profitability being impacted over the latest quarter. HPCL achieved crude throughput of 4.49 MMT, up 77.5 per cent YoY (down 6.7 per cent QoQ) during the quarter. Reported GRMs stood at $ 8.3/bbl.

HPCL suffered a loss despite taking into account a one-time grant the Centre had announced on October 12 for oil majors to make up for the losses incurred on selling cooking gas LPG below its cost in the last two years.

The government recently approved a one-time grant of Rs 5,617 crore to compensate for the under-recoveries incurred on sale of domestic LPG during FY22 and current period, which has been duly recognized by the company in Q2FY23.

HPCL's crude throughput and marketing sales declined QoQ in Q2FY23. On the refining front, product cracks dipped from elevated levels seen in Q1FY23. Passing on higher retail prices of petrol & diesel (due to increase in crude oil costs) to customers will be important for HPCL's performance in the near term, ICICI Securities said in a note.

Motilal Oswal Financial Services expects FY23 capex at around Rs 137 billion and an estimated capex of Rs 610 billion in the next five years with the company’s focus being on enhancing its refining and marketing infrastructure, foray into petrochemicals and expanding footprints in Alternate Energy.

The completion of various ongoing projects will drive growth over the next 3-5 years, such as: Bhatinda refinery expansion, bottom up gradation unit at Vizag in H2FY23, and Rajasthan (Barmer) refinery in FY24. Further, HPCL is working on the petchem projects such as setting up of a 4.6mmtpa petrochemical capacity by FY25 along with JVCs that will help it become the second-largest petrochemicals production facility in India, the brokerage firm said in result update, with ‘neutral’ rating on the stock.