ICICI Securities Assigns Buy On Oil & Gas PSU Stock, TP Rs 355/Share

ICICI Securities has a Buy on Hindustan Petroleum Corporation Limited (HPCL) with a Target Price of Rs 355 per share. The brokerage sees a potential upside of up to 32% from the stock's current market price considering the given target price.

HPCL is a Maharatna status midcap company operating in the Oil & Gas sector. It has a market cap of Rs 38,357.55 Crore.

Hindustan Petroleum's (HPCL) recurring standalone EBITDA / PAT for Q1FY24 came in at INR 86.6bn / INR 54.6bn, up 81% /70% QoQ, respectively (Q1FY23 saw huge losses for HPCL) vs our estimates of EBITDA of INR 83bn and PAT of INR 52bn, according to the brokerage.

FY24E-FY25 to see stronger recovery with sharp rise in refining throughput

According to ICICI Securities, HPCL is on track to raise its refinery capacity meaningfully by 7mtpa for its standalone Vizag refinery and another 4-5mtpa capacity to come via its 50% share in Rajasthan refinery (HMEL).

ICICI Securities said, "Our upward revisions to marketing margins and GRMs have led to 31% and 18% increase to FY24E and FY25E EPS, respectively. Also, higher the cashflow over FY24E, lower the net debt materially, easing leverage worries as well over the next 2-3 years. Valuations of just 3.2x FY25E EPS and 4.7x EV/EBITDA, coupled with P/BV also at a comfortable 0.8x for FY25E, provide an attractive risk reward. We reiterate BUY on the stock with a revised target price of INR 355/sh (earlier: INR 315)."

Upside & Downside Risks

The brokerage lists Lower marketing margins, lower GRMs, delays in project commissioning as ket downside risks to buy call. While Faster execution of capacity expansion, lower-than-expected drop in marketing earnings, higher refining margins as the key upside risks.

Stock Movement- Current Market Price, Returns & 52-Week High/Low

Shares of HPCL closed on Thursday at Rs 270.40 per share on BSE with intraday high and low of Rs 277.80 and Rs 268.25, respectively. The shares declined 2.15%, it opened at Rs 277 per share, while the previous close was Rs 276.35 per share.

The shares fell 6.97% in 1 week, 10% in 2 weeks, and 4.6% in 1 month, respectively. Shares gained 10.98% in 1 year, and 24.01% in 3 years, respectively. However, it declined 7.49% in 5 years.

The stock hit 52-week high is Rs 309.85 per share, recorded on July 27, 2023, and 52-week low is Rs 200 per share, recorded on Oct 20, 2022.

Disclaimer - The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.