Hindustan Petroleum Corporation: Prabhudas Lilladher Initiates Coverage with Buy Rating, Target Price Rs 427

Hindustan Petroleum Corporation Sees Significant Growth in Q4FY26

Hindustan Petroleum Corporation (HPCL) has reported a significant increase in its Gross Refining Margin (GRM) for the fourth quarter of fiscal year 2026 (Q4FY26). The GRM stood at USD14.3 per barrel in Q4FY26, a substantial improvement from USD5.4 per barrel in the previous quarter (Q3FY26).

Despite a flat quarterly on-quarter (QoQ) refining throughput of 6.4 million metric tons (mmt), HPCL's marketing sales volumes, including exports, increased by 2.4% year-over-year (YoY) to 13.0 mmt. However, this was offset by a decline of 2.5% QoQ. The implied Gross Marketing Margin (GMM) for Q4FY26 was INR6.2 per liter, compared to INR5.4 per liter in Q3FY26.

HPCL's earnings before interest, taxes, depreciation, and amortization (EBITDA) for Q4FY26 came in ahead of estimates at INR89.8 billion, representing a growth of 27.9% and 54.7% YoY and QoQ respectively. This was driven by improved operational performance in fiscal year 2026 (FY26), which led to a growth of 83.6% and 133.2% YoY in EBITDA and Profit After Tax (PAT) to INR304.9 billion and INR171.8 billion respectively.

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HPCL has maintained its crude inventory at normal levels of approximately 60 days, with May and June 2026 supplies fully secured at higher premiums. The company has also secured supplies until July 15, 2026, while procurement for the remainder of the month is ongoing. Despite no hike in Retail Selling Price (RSP) prices, the marketing margins for Motor Spirit (MS) and High-Speed Diesel (HSD) remain negative.

We estimate the GMM at INR2.1 per liter and INR4.9 per liter, while building in GRM assumptions of USD7.3 per barrel and USD7.1 per barrel for fiscal year 2027 (FY27E) and FY28E respectively.

Valuation and Outlook

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We value Hindustan Petroleum Corporation at 1.2 times its fiscal year 2028 (FY28E) Price-to-Book Value (PBV), an increase from our earlier estimate of 1.1 times. We maintain our Accumulate rating and have revised our target price to INR427, up from INR421.