HPCL (Q2 FY14)

India Infoline News Service | Mumbai |

HPCL reported a profit of Rs3,189mn vis-à-vis a profit of Rs23,271mn in Q2 FY13 and a loss of Rs14,605mn in Q1 FY14.

CMP Rs210, Target Rs220, Upside 4.8%
  • HPCL reported net sales growth of 5.6% yoy in Q2 FY14 on back of 5% yoy rise in realizations as product prices were higher on yoy basis on the back of price hikes implemented of diesel over the past many months. Market sales remained flat at 7.2mn tons. The budgetary support during the quarter was Rs41.3bn vis-à-vis Rs66.7bn in Q2FY13 (full compensation for H1 FY13 was received in Q2 FY13) and sans the government compensation the topline was higher at 12% yoy. Total crude throughput (Mumbai + Vizag) at 3.9mmt saw strong sequential recovery (+13% qoq) and was also higher by 7% yoy.


  • During the quarter, the government payout towards under recoveries was Rs41.3bn and the upstream contribution was Rs39.1bn. For H1 FY14, the net under recoveries for HPCL stood at Rs7.2bn as compared to Rs56.5bn in the same period last year.


  • Quarterly GRM’s strengthened to US$3.8/bbl on a sequential basis from US$2.6/bbl in Q1 FY14 but were lower on a yoy basis (Q2 FY13 GRM of US$4.3/bbl). For H1 FY14, company recorded a cumulative GRM of US$3.3/bbl v/s US$1.2/bbl in H1 FY13.


  • HPCL reported a profit of Rs3,189mn vis-à-vis a profit of Rs23,271mn in Q2 FY13 and a loss of Rs14,605mn in Q1 FY14. HPCL continues to have lowest Refining to Marketing mix among all the oil marketing companies and thereby remains most exposed to the subsidy payout uncertainties. Although OMCs have continued to raise diesel prices by ~Rs0.5/litre in the past many months, sustainability of the trend is difficult considering ensuing important state elections as well general elections. Implementation of export parity pricing, if it goes through, will hit the company hard as its GRMs will head into negative territory. Sporadic cash-flow from government in lieu of its subsidy share has also been a concern. We continue to rate the stock as Market performer with an revised 9-month target price of Rs220.

Cost analysis
As a % of net sales
Q2 FY14
Q2 FY13
bps yoy
Q1 FY14
bps qoq
Material costs
24.0
20.9
304
27.1
(317)
Purchases
67.9
68.2
(28)
68.4
(46)
Personnel Costs
1.0
1.4
(39)
0.9
5
Other overheads
5.2
3.6
160
4.9
30
Total costs
98.0
94.1
398
101.3
(328)
Source: Company, India Infoline Research

Result table
(Rs mn)
Q2 FY14
Q2 FY13
% yoy
Q1 FY14
% qoq
Net sales
518,602
491,298
5.6
517,639
0.2
Material costs
(124,239)
(102,740)
20.9
(140,405)
(11.5)
Purchases
(352,289)
(335,132)
5.1
(354,020)
(0.5)
Personnel costs
(5,161)
(6,796)
(24.1)
(4,913)
5.0
Other overheads
(26,771)
(17,491)
53.1
(25,180)
6.3
Operating profit
10,142
29,138
(65.2)
(6,879)
(247.4)
OPM (%)
2.0
5.9
(398) bps
(1.3)
328 bps
Depreciation
(5,426)
(4,910)
10.5
(5,100)
6.4
Interest
(3,962)
(3,899)
1.6
(4,668)
(15.1)
Other income
2,435
2,941
BSE 419.05 [12.85] ([2.98]%)
NSE 419.20 [13.35] ([3.09]%)

***Note: This is a NSE Chart

 

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