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Anand Rathi Securities
HPCL (Buy)
Target: ₹306
CMP: ₹245.65
Hindustan Petroleum Corporation recorded a profit after tax (PAT) of ₹2,004 crore compared with ₹2,253 crore for the same quarter last year, witnessing a fall of 11 per cent, due to a planned shutdown of the refinery. EBITDA stood at ₹3,193 crore, declining by 26.8 per cent y-o-y and 32.6 per cent q-o-q. Gross sales for the quarter-ended June stood at ₹73,560 crore as compared with ₹45,950 crore for the same period last year.
The crude prices are likely to stay in the range of $70-75 per barrel in the near term or at least till March 2022 unless there was a major third wave of coronavirus infections which would impact demand. The management reiterated its capex guidance of ₹14,500 crore each year for FY22 and FY23, tapering down from FY24. Q1FY22 capex spend was at ₹3,000 crore, including ₹1,200 crore on equity investments in JVs. We have a positive outlook on HPCL given its earnings growth visibility on the back of its capex plans and improvement marketing margin environment. The company also is doubling its existing capacity at Visakhapatnam and Mumbai refineries, this will drive the earnings for its refinery business.
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