HPCL up 4%, at 8-mth high: Time to buy or sell? Here's what brokerages say

HPCL share price outlook: While OMCs near-term earnings will remain strong (despite oil price spike), Kotak Institutional Equities said key concerns remain on the lack of pricing power and large capex

Hindustan Petroleum Corporation (HPCL) share price

 

Shares of Hindustan Petroleum Corporation (HPCL) hit an eight-month high at ₹424.35, as they rallied 4 per cent on the BSE in Thursday’s intra-day trade amid a sharp correction in the crude oil prices, after the US President announced ceasefire in the Israel-Iran war.

 

The stock price of the state-owned oil marketing company (OMC) was trading higher for the fifth straight day, surging 9 per cent in one week. In comparison, the BSE Sensex was up 1.7 per cent during the same period. 

 

Shares of HPCL hit its highest level since October 2024. The stock had hit a 52-week high of ₹457.20 on September 5, 2024. At 11:02 AM; HPCL was trading 2 per cent higher at ₹415.80, as compared to 0.5 per cent rise in the BSE Sensex.

 

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Meanwhile, share price of Bharat Petroleum Corporation (₹328.80) and Indian Oil Corporation (₹144.90) were up 3 per cent and 2 per cent, respectively, in intra-day trade.

 

OMCs were earning a gross margin of ₹7.9 per litre on gasoline and ₹4.3 per litre on diesel. Therefore, any downward movement of international crude oil prices would rise margin of these companies.  READ STOCK MARKET UPDATES TODAY LIVE 

On Monday, both oil contracts settled down more than 7 per cent. They had rallied to five-month highs after the US attacked Iran's nuclear facilities, Reuters reported.

 

Kotak Institutional Equities view on OMCs

 

With prices of retail fuels (83-85 per cent of volumes) frozen, OMCs are an inverse oil play. With oil prices declining (average $67/63/bbl in April/May), OMCs’ marketing margins were very high. There was an expectation of retail price cuts (Oil Minister: OMCs have headroom to cut retail prices). 

 

With geopolitical worries rising, retail price cuts are unlikely soon. If retail prices were cut, a reversal would have been difficult. But if the conflict eases soon, margins may further rise. While OMCs’ near-term earnings will remain strong (despite the oil price spike), the brokerage firm said its key concerns remain on the lack of pricing power and large capex.  ALSO READ | ASK Automotive hits record high on JV with TD Holding; up 18% in 7 sessions

Emkay Global Financial Services view on HPCL

 

HPCL’s current major capex cycle is coming to an end. For now, focus is on returns from this capex, before it embarks on the next leg for meeting the 5-year capex cycle of ₹77,000 crore. Capex is being made prudently now. There are no huge projects as of now. It aims to veer debt-to-equity and serviceability in the right direction.

 

The new CMD, being a career energy consultant, has always been positive on HPCL. He believes it is an excellent business with a highly competent team, in refining as well as in marketing, and has achieved much so far. There are improvement opportunities, which would be the main focus; the company will unveil its plans going ahead. It would work for shareholder value creation, including minorities.

 

“In FY25, HPCL outperformed PSU peers, gaining 0.25 per cent market share. LPG loss rose 6 per cent quarter-on-quarter (QoQ) to ₹3,300 crore in Q4, while net debt grew 6 per cent year-on-year (YoY)/19 per cent QoQ to ₹57,900 crore. The new CMD stressed on focus on returns from the current capex cycle which is coming to an end and generating positive free cash flow (FCF) with debt reduction. The brokerage firm raise FY26E/27E EPS by 22 per cent/16 per cent, building in better margins; analysts raise rolled over Mar-26E target price by ~11 per cent to ₹500 from ₹450; retain BUY,” the brokerage firm said in the Q4 result update.