HPCL, BPCL gain up to 4% on bonus issue plan; IOCL down 2%

The boards of directors of HPCL, and BPCL are scheduled to meet on Thursday, May 9, 2024 to consider bonus issue plan

Shares of Hindustan Petroleum Corporation (HPCL), and Bharat Petroleum Corporation (BPCL) gained up to 4 per cent on the BSE in Tuesday's intraday trade after the state-owned oil marketing companies (OMCs) announced bonus issue plans.

The boards of directors of HPCL, and BPCL are scheduled to meet on Thursday, May 9, 2024 to consider the bonus issue plan. Earlier, these companies had said that they will consider and approve the financial results for the quarter and financial year ended March 31, 2024 and also consider recommendation of final dividend, if any, for the financial year 2023-24 (FY24) that day.

Earlier, in July 2017, HPCL and BPCL had issued bonus shares in the ratio of 1:2 i.e. one equity share for every 2 equity shares.

 

Individually, HPCL rallied 4 per cent to Rs 534.50, while BPCL gained 3 per cent to Rs 628.50 on the BSE in the intraday trade. Thus far in the calendar year 2024, BPCL (35 per cent), HPCL (30 per cent) and Indian Oil Corporation (IOCL) (25.1 per cent) have outperformed the market by surging over 25 per cent as compared to 1.7 per cent rise in the S&P BSE Sensex.

At 11:04 AM, HPCL and BPCL were up less than 1 per cent, as compared to 0.53 per cent decline in the benchmark index. IOCL, however, was down 2 per cent at Rs 162.85 on the BSE.

"A combination of stronger product spreads in the last week of March 2024, higher inventory gains, and guidance of stronger marketing margins overall (other than just retail fuel margins) from industry channel checks implies Q4E Ebitda and net profit may surprise on the upside for HPCL," according to analysts at ICICI Securities.

There are undoubtedly some speed bumps ahead, with the spectre of stronger crude prices for the rest of the year, driven by heightened geopolitical tensions in the Middle East, continued Russia – Ukraine conflict ramifications, OPEC+ production cuts persisting for longer than expected and demand estimates being steadily upgraded by the likes of IEA, as has been the case for the last several years.

Having said that, the reasons for our positive stance on HPCL, while factoring in the surge in gross refining margins (GRMs) and recovery in FY24 EPS over FY23 losses is also based on structural long-term factors such as a material expansion in available refining capacity, from 58 per cent of annual marketing sales to 74 per cent of marketing sales by FY26E end, materially altering the earnings mix, addition of petchem volumes of 2.5-2.6mt by the end of FY26E,  improving return ratios and leverage as a result of stronger cash flow and operating earnings, analysts at ICICI Securities said.

In a separate development, IOCL is set to commission various projects over the next two years, driving further growth. Refinery projects, currently under way, are expected to be completed as follows: Panipat refinery (25mmtpa) by December 2025, Gujarat refinery (18mmtpa) by October 2024, and Baruni refinery (9mmtpa) by December 2024.