Hindustan Petroleum Corporation (HPCL), Q3FY21 result was a beat to our and consensus forecast at all parameters primarily led by higher inventory gains and lower interest costs and higher other income. Reported GRM came at USD 1.9/bbl but after adjusting to inventory gains it comes to -USD 1/bbl, below our estimate.
Petroleum product sales volume/crude throughput declined 2%/4% YoY to 10.4/4.0mmt. However, strong marketing margin on auto fuels led growth during the quarter. HPCL has guided for addition of 2mmt of refining capacity at Mumbai from CY22 and ~5mmt refining capacity by end CY21. Also, it expects Rajasthan Refinery of 9mmt to complete by CY23 and Chhara LNG terminal by CY22.
IDBI Capital expects HPCL to benefit from higher throughput and GRM in FY22/23 along with stable marketing margin. "To factor the beat and lower interest costs, we raise EBITDA for FY21/22/23 by 11.9%/7.4%/11.1% respectively and raise our TP to Rs 285. Maintain Buy."
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