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Hindustan Petroleum Corporation (HPCL)
Underweight ; HPCL.BO, HPCL IN
3QFY11: GRMs, throughput drive 3Q earnings
• GRMs, throughput drive 3Q earnings: HPCL reported 3Q profits of
Rs2.11bn, (up 572% y/y) with GRMs rising to $5.1/bbl and crude
throughput rose as refineries came out of maintenance.
• GRMs recover: HPCL GRMs for the quarter came in at ~$5.1/bbl (vs.
$2.66/bbl in 2Q) in sync with regional refining strength (Singapore
GRMs were $4.55/bbl in 3Q).
• Throughput rises: Refinery throughput for the quarter was 4.1mmt
(up 35% sequentially), as refineries came out of maintenance runs.
• Govt. subsidy payout supports earnings….: The govt. provided
Rs17.5bn in subsidies to HPCL, adding to the Rs11.4bn from the
upstream companies, providing a cushion to earnings.
• ...but policy risks will overshadow near-term earnings: With Brent
now above $100/bbl, subsidies are likely to remain elevated given the
lack of diesel pricing reforms. As such, we think risks to R&M
earnings remain, with lack of visibility on the final subsidy share
scheme.
• Price target, valuations and key risks: We maintain our Underweight
stance, and Mar-11 price target of Rs365, based on 6x FY12E
EV/EBITDA, at a discount to regional peers given continuing policy
uncertainty. Key risks to our call emanate from policy initiatives on
subsidy sharing and diesel de-regulation.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hindustan Petroleum Corporation (HPCL)
Underweight ; HPCL.BO, HPCL IN
3QFY11: GRMs, throughput drive 3Q earnings
• GRMs, throughput drive 3Q earnings: HPCL reported 3Q profits of
Rs2.11bn, (up 572% y/y) with GRMs rising to $5.1/bbl and crude
throughput rose as refineries came out of maintenance.
• GRMs recover: HPCL GRMs for the quarter came in at ~$5.1/bbl (vs.
$2.66/bbl in 2Q) in sync with regional refining strength (Singapore
GRMs were $4.55/bbl in 3Q).
• Throughput rises: Refinery throughput for the quarter was 4.1mmt
(up 35% sequentially), as refineries came out of maintenance runs.
• Govt. subsidy payout supports earnings….: The govt. provided
Rs17.5bn in subsidies to HPCL, adding to the Rs11.4bn from the
upstream companies, providing a cushion to earnings.
• ...but policy risks will overshadow near-term earnings: With Brent
now above $100/bbl, subsidies are likely to remain elevated given the
lack of diesel pricing reforms. As such, we think risks to R&M
earnings remain, with lack of visibility on the final subsidy share
scheme.
• Price target, valuations and key risks: We maintain our Underweight
stance, and Mar-11 price target of Rs365, based on 6x FY12E
EV/EBITDA, at a discount to regional peers given continuing policy
uncertainty. Key risks to our call emanate from policy initiatives on
subsidy sharing and diesel de-regulation.
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