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L o w e r r e f i n i n g m a r g i n s d r a g b o t t o m l i n e …
Hindustan Petroleum Corporation (HPCL) declared its Q2FY12 results with
revenues of | 37104.2 crore, EBITDA loss of | 2869.7 crore and net loss of
| 3364.5 crore. The results were below our estimates mainly on account
of a sharp drop in refining margins and higher net under-recoveries. The
downstream companies shared a net subsidy burden of 66.67% (|
14248.5 crore) in Q2FY12. Changes in the customs duty structure in June
end led to a sharp decline in the refining margin to US$1.9/barrel in
Q2FY12. The interest cost stood at | 302.8 crore in Q2FY12 increasing
significantly by 37.6% YoY. We have maintained our Brent crude oil
prices estimates of US$100/barrel, going forward. We expect gross
under-recoveries at ~| 1,10,950 crore and ~| 83,500 crore in FY12E and
FY13E, respectively. We assume net under-recoveries for downstream
companies at 8.8% in FY12E and FY13E. We estimate HPCL will report
EPS of | 32.4 and | 52.2, respectively, in FY12E and FY13E. We
recommend a BUY rating on the stock with a price target of | 465.
ƒ Highlights of the quarter
The crude oil throughput increased 40% YoY from 3.0 MMT in
Q2FY11 to 4.2 MMT in Q2FY12 due to higher capacity utilisation
from both Mumbai and Vishakhapatnam refinery. Gross refining
margins (GRMs) dropped significantly from US$2.7/barrel in Q2FY11
to US$1.9/barrel in Q2FY12 due to changes in the customs duty
structure in June end. Total market sales increased 15% YoY from
6.0 MMT in Q2FY11 to 6.9 MMT in Q2FY12. The net subsidy burden
for downstream companies in this quarter is 66.67% in Q2FY12,
which led to net under-recoveries of | 3125 crore in Q2FY12.
V a l u a t i o n
HPCL is trading at 10.3x FY12E and 6.4x FY13E EPS of | 32.4 and | 52.2,
respectively. We recommend a BUY rating on the stock with a price target
of | 465 (valuation based on average of P/BV multiple: | 427/share and
P/E multiple: | 502/share).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
L o w e r r e f i n i n g m a r g i n s d r a g b o t t o m l i n e …
Hindustan Petroleum Corporation (HPCL) declared its Q2FY12 results with
revenues of | 37104.2 crore, EBITDA loss of | 2869.7 crore and net loss of
| 3364.5 crore. The results were below our estimates mainly on account
of a sharp drop in refining margins and higher net under-recoveries. The
downstream companies shared a net subsidy burden of 66.67% (|
14248.5 crore) in Q2FY12. Changes in the customs duty structure in June
end led to a sharp decline in the refining margin to US$1.9/barrel in
Q2FY12. The interest cost stood at | 302.8 crore in Q2FY12 increasing
significantly by 37.6% YoY. We have maintained our Brent crude oil
prices estimates of US$100/barrel, going forward. We expect gross
under-recoveries at ~| 1,10,950 crore and ~| 83,500 crore in FY12E and
FY13E, respectively. We assume net under-recoveries for downstream
companies at 8.8% in FY12E and FY13E. We estimate HPCL will report
EPS of | 32.4 and | 52.2, respectively, in FY12E and FY13E. We
recommend a BUY rating on the stock with a price target of | 465.
ƒ Highlights of the quarter
The crude oil throughput increased 40% YoY from 3.0 MMT in
Q2FY11 to 4.2 MMT in Q2FY12 due to higher capacity utilisation
from both Mumbai and Vishakhapatnam refinery. Gross refining
margins (GRMs) dropped significantly from US$2.7/barrel in Q2FY11
to US$1.9/barrel in Q2FY12 due to changes in the customs duty
structure in June end. Total market sales increased 15% YoY from
6.0 MMT in Q2FY11 to 6.9 MMT in Q2FY12. The net subsidy burden
for downstream companies in this quarter is 66.67% in Q2FY12,
which led to net under-recoveries of | 3125 crore in Q2FY12.
V a l u a t i o n
HPCL is trading at 10.3x FY12E and 6.4x FY13E EPS of | 32.4 and | 52.2,
respectively. We recommend a BUY rating on the stock with a price target
of | 465 (valuation based on average of P/BV multiple: | 427/share and
P/E multiple: | 502/share).
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