Hindustan Petroleum Shares Complete Fundamental Analysis and Future Outlook
Hindustan petroleum incorporated in 1952 as Standard Vacuum Oil refining company (StanVac) was amalgamated with ESSO and Lube India in 1974 to form HPCL.
- The ONGC-HPCL merger was completed in January 2018 after ONGC bought the government’s entire 51 % stake in HPCL for Rs 36,915 crore.
- The company is involved in Oil refining, Lubricants, Aviation fuels, Natural Gas and Renewable energy. It has a pipeline network of 3,370 km making it one of the largest refiner and distributor in India.
- The company’s shares have seen a correction from its 52 weeks high of INR 333.5 and have a market capitalization of INR 310 Billion.
- The company has developed a robust infrastructure over the years along with state of the art technologies. HPCL ranks 58 in the Platts top 250 global energy companies and has 15,440 retail outlets in India.
- It currently has 42 terminals, 75 depots, 49 LPG plants and 43 lube building plants. It had a total of 4.1 million metric tonnes of Petroleum, Oil and Lubricant (POL) storage in FY 2019.
I have evaluated the company on 10 fundamental categories and each has been given a rating out of 5 stars. From this, I have arrived at a combined stock rating for the company.
This is the summary of the analysis. You can read the detailed analysis with the excel models on my blog (Check the source link)
Source:Hindustan Petroleum Shares Complete Fundamental Analysis and Future Outlook
Some insights for the coming years from management discussion & analysis (MD&A) and con calls are as follows.
- The COVID-19 lockdown and OPEC+ disintegration has resulted in a sharp correction in the Crude oil prices. The US oil futures traded at negative prices for the first time in its history due to storage concerns. The impact of lockdown in India will also result in revenue loss for refineries in double digits.
- Incremental production of oil should largely offset oil depletion from the old fields for ONGC. This means HPCL will not see a decline in refining volumes after the lockdown. The margins, however, will be impacted negatively.
- Deeper penetration in Rural India for LPG distribution holds the key to improved revenue for HPCL in the coming years. It will also benefit from Government initiatives like Ujjwala Yojana.
- Marketing margins to remain healthy for refining companies with low oil prices and lack of interference by the Government. It will also improve the Gross Refining Margin for the company.
- The expected Gross Refining Margin will be around $ 5–6 per barrel in the coming years. This will improve profitability.
The outlook of the petroleum and refining industry is uncertain due to the volatile oil prices and demand-supply mismatch because of COVID-19 outbreak and OPEC+ dispute.
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