HPCL - March 2013 Results Preview - Motilal Oswal

- Similar to prior quarters, profitability of OMCs (BPCL, HPCL, IOC) would depend more on subsidy sharing, which is ad-hoc, than on business fundamentals. Government's subsidy compensation typically comes with a delay.

- 4QFY13 gross under-recovery is down 5% QoQ due to the impact of diesel reforms and lower LPG subsidies.

- In 9MFY13, HPCL's PAT loss stood at INR67.7b as it had to bear a net under-recovery of INR55b. Similar to FY12, we model OMCs' subsidy sharing at nil for FY13E and hence model INR55b over-recovery for 4QFY13E.

- For subsidy sharing on annual basis, we model OMCs' sharing at nil, upstream sharing at 40% and government sharing at balance 60% in FY13E/FY14E/FY15E.

- We peg the refinery throughput at 4.3mmt for 4QFY13E v/s 4mmt in 4QFY12 and 4.2mmt in 3QFY13.

- We expect HPCL to report a profit of INR72.3b in 4QFY13E, thereby taking full year PAT to INR5b v/s INR9b in FY12.

- HPCL trades at 8.8x FY15E EPS and 0.6x FY15E BV. We have a Buy rating due to our positive stance on diesel reforms and attractive valuations.

Source : Equity Bulls

Keywords