HPCL (Q3 FY14)

India Infoline News Service | Mumbai |

HPCL reported net sales growth of 3.8% yoy in Q3 FY14 on back of 9% 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.

CMP Rs245, Target Rs250, Upside 2.0%
  • HPCL reported net sales growth of 3.8% yoy in Q3 FY14 on back of 9% 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 7.8mn tons. The budgetary support during the quarter was Rs23.3bn vis-?-vis Rs55.4bn in Q3 FY13 and sans the government compensation the topline was higher at 11% yoy. Total crude throughput (Mumbai + Vizag) at 3.8mmt saw a yoy decline of 9% and a sequential fall of 1.3%.

  • During the quarter, the government payout towards under recoveries was Rs23.3bn and the upstream contribution was Rs37bn. For 9m FY14, the net under recoveries for HPCL stood at Rs39bn as compared to Rs54.6bn in the same period last year.

  • Quarterly GRM's strengthened to US$2.6/bbl on a yoy basis from US$1.9/bbl in Q3 FY13 but were lower on a sequential basis (Q2 FY14 GRM of US$3.8/bbl). For 9m FY14, company recorded a cumulative GRM of US$2.9/bbl v/s US$1.5/bbl in 9m FY13.

  • HPCL reported a net loss of Rs17.3bn vis-?-vis a profit of Rs1,471mn in Q3 FY13 and a profit of Rs3,189mn in Q2 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 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 a revised 9-month target price of Rs250.

Cost analysis
As a % of net sales Q3 FY14 Q3 FY13 bps yoy Q2 FY14 bps qoq
Material costs 32.6 34.5 (196) 24.0 861
Purchases 65.1 58.6 654 67.9 (283)
Personnel Costs 1.0 1.0 1 1.0 1
Other overheads 3.0 3.9 (94) 5.2 (215)
Total costs 101.7 98.0 365 98.0 363
Source: Company, India Infoline Research

Result table
(Rs mn) Q3 FY14 Q3 FY13 % yoy Q2 FY14 % qoq
Net sales 554,550 534,139 3.8 518,602 6.9
Material costs (180,614) (184,453) (2.1) (124,239) 45.4
Purchases (360,991) (312,784) 15.4 (352,289) 2.5
Personnel costs (5,570) (5,303) 5.0 (5,161) 7.9
Other overheads (16,682) (21,093) (20.9) (26,771) (37.7)
Operating profit (9,307) 10,506 - 10,142 -
OPM (%) (1.7) 2.0 (365) bps 2.0 (363) bps
Depreciation (5,566) (4,947) 12.5 (5,426) 2.6
Interest (4,432) (6,135) (27.8) (3,962) 11.9
Other income 1,965 2,046 (4.0) 2,435 (19.3)
PBT (17,339) 1,471 - 3,189 -
Adjusted PAT (17,339) 1,471 - 3,189 -
Adj. PAT margin (%) (3.1) 0.3 (340) bps 0.6 (374) bps
Ann. EPS (Rs) (204.8) 17.4 - 37.7 -
Source: Company, India Infoline Research

Valuation summary
Y/e 31 Mar (Rs m) FY13 FY14E FY15E FY16E
Revenues 2,044,419 2,266,122 2,396,771 2,555,807
yoy growth (%) 14.6 10.8 5.8 6.6
Operating profit 40,710 53,802 65,298 68,614
OPM (%) 2.0 2.4 2.7 2.7
Pre-exceptional PAT 6,753 14,631 20,787 21,789
Reported PAT 6,753 14,631 20,787 21,789
yoy growth (%) (25.9) 116.7 42.1 4.8
         
EPS (Rs) 19.9 43.2 61.3 64.3
P/E (x) 12.3 5.7 4.0 3.8
Price/Book (x) 0.6 0.6 0.5 0.5
EV/EBITDA (x) 10.2 7.8 6.3 6.0
Debt/Equity (x) 2.5 2.3 2.0 1.8
RoE (%) 5.1 10.4 13.4 12.6
RoCE (%) 6.6 8.6 10.2 10.1
Source: Company, India Infoline Research

***Note: This is a NSE Chart

 

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