7 HINDPETRO share price target reports by brokerages below. See what is analyst's view on HINDPETRO share price forecast, rating, estimates, valuation and prediction behind the target. You may use these research report forecasts for long-term to medium term for your investment or trades in 2020.
We maintain Buy on IOC and upgrade BPCL and HPCL from Accumulate to Buy following revised earnings and TP, which we have rolled over to FY22E. We see PSU refining majors (OMCs) delivering double-digit returns in the next 6-12 months based on the upside leverage to marketing margins under low oil prices below US$40-50/bbl. We believe that these stocks are poised to enter the blue sky phase last seen during FY14-17, when the steep fall in oil price from US$107 to US$47-50/bbl boosted marketing margins and earnings for the OMCs. As a result, IOC and BPCL delivered compounded returns of 39% and 40%, respectively while HPCL’s stock price witnessed a CAGR of 70% over April 2014-March 2017. This is likely to offset the risk to earnings from pressure on GRMs (tough to predict), inventory losses and the hit on refining and marketing volume (due to the COVID19 lockdown). We have raised earnings for the OMC trio assuming about 10% hit on volume in 1QFY21, weak GRMs and Rs3/lit upside in retail margins in FY21. These are subject to change as and when we get official confirmation on the lockdown impact. The INR/USD depreciation, while negative for MTM impact in fx loans, is overall a tailwind assuming that the combined spread in refining and marketing remains +ve. We have raised our TP for HPCL by 43.9% to Rs353 and for IOC a tad to Rs137. We are cutting the TP for BPCL by 22.6% to Rs414 based on our reduced target multiple - from 10.9x (10% premium to SD+1 on 5 year median) to 6.1x (SD-1), as the stake sale tailwind is likely to wane until the COVID-19 related uncertainty ends.
Marginal declines in Fuel oil and LPG cracks during the quarter affected the topline. Also, industry demand was impacted by Coronavirus outbreak and consequently led to increased volatility in oil prices. However, we expect market conditions to improve owing to IMO regulations. We estimate company’s earnings to grow at healthy 21.8% CAGR over FY20-22E supported by ongoing capacity expansion and expected improvements in GRMs and reiterate our BUY rating on the stock with a revised target price of Rs. 289 using SOTP methodology.
We maintain BUY on HPCL with a revised PT of Rs295 (Rs354 earlier) as we value based on 10x PER FY21E and also lower the value of Bhatinda value to Rs34.
We maintain BUY on HPCL with a revised PT of Rs295 (Rs354 earlier) as we value based on 10x PER FY21E and also lower the value of Bhatinda value to Rs34.
In the current benign crude price environment, we expect to see structural changes in the pricing of LPG and kerosene, which may bid farewell to under-recoveries in the petroleum sector. HPCL trades at ~35% discount to the average since FY15. Valuing it at 1.3x (20% discount to FY15-18 post the reform period, factoring in heavy capex and project execu
We are neutral on HPCL at the current juncture given the volatility in global GRMs and uncertainty on the company’s ability to pass on costs tocustomers during high oil prices. IOC’s marketing margins and trend inrefining margins will determine its near term performance. We have a HOLD recommendation on the stock with a target price of | 265.
Slashing EPS and TP on steep 52.8% YoY fall in 1QFY20 earnings We maintain Sell post our 23.6% and 23.3% cut in FY20-21 EPS and 6.4% reduction in TP to Rs 195/sh based on FY21E PE of 5.39x (10% premium to SD -1 on 5 year Median PE). We expect HPCL’s core business to remain weak due to pressure on GRMs and likely increasein competition in the profitable fuel retailing segment from private sector companies. Inaddition valuations would also be hampered by HPCL management’s refusal to acceptONGC as promoter. Maintain Sell with 20% downside from CMP to our TP Rs195/sh.
Muted performance but better times ahead We tweak our earnings to factor changes in forex rate (USD/INR at Rs70/72.1 for FY20/21) and other minor changes post Annual report updation. During Q1, core performance for HPCL was hit by inventory loss and lower than expected GRMs. However, benign crude prices and recovery in refining margins is positive for the OMCs and hence we expect a much better Q2FY20. State PSUs are also likely to benefit from implementation of IMO2020 effective January given >40% diesel slate. Maintain BUY with a revised PT of Rs354 (Rs326) based on 10x FY21E.
Valuation &Outlook: Among the three OMCs, we have a positive outlook on HPCL given its earnings growth visibility on the back of its capex plans and improvement marketing margin environment. The stock underperformed in FY19 due to volatile crude prices and uncertainty during the on-going election period keeping marketing margins under pressure. Now with a stable government at the Centre, OMCs stand a chance for higher flexibility allowing them to protect marketing margins in the light of any volatility in crude prices. We have revised our estimates factoring in the same. We expect revenues to grow at a CAGR of 7.6% over FY19-21E and EBITDA to grow at a CAGR of 5.9% over FY19-21E. At a CMP of INR 303, HPCL is trading at 6.0/5.3x of FY20/21E EV/EBITDA. We maintain our EV/EBITDA-based target price ofINR 343.(potential upside – 13.2%). We maintain BUY rating on the stock.
We remain concerned over the increase in capex over the next five years, rise in interest costs and also concerns over product pricing freedom. We believe that with likely low earnings growth and a decline in RoE and RoCE, the stock will get de-rated. We have retained Sell rating on HPCL with a target price of Rs208 (based on SOTP valuation of FY21E earnings). We will be revising our estimates shortly.
OMCs could not take any price hike to compensate for the rising product prices till mid-May in an election packed environment. Now onwards, normative margins will be restored allowing HP to be the largest beneficiary as its earnings are highly sensitive to changes in the marketing margins (EBITDA contribution of ~60% vs 55/44% for BP/IOC). Our SOTP target is Rs 346 (6x Mar21E EV/e for standalone refining and pipeline, 7x EV/e for marketing and Rs 57/sh from other investments).
Concerns around the ability of the OMCs to take price hikes amid elections are overdone and clarity over marketing margins would benefit HPCL the most. However, due to high capex (Vizag expansion and Rajasthan refinery-cum- petrochem complex), free cash flow is likely to remain negative in FY20, in our view. HPCL is trading at 5.7x consol. FY20E EPS of INR51.3 and 1.3x FY20E PBV. We value HPCL at 1.2x FY21 PBV. Reiterate Neutral with a TP of INR309.
We upgrade oil marketing companies (OMC’s) to BUY as we look beyond May 2019, wherein two important factors that determine the fortunes of OMCs gets settled-1) Central elections and uncertainties of policy overhang 2) clarity on Iran sanctions, which will determine trends in international crude oil prices. We believe that the risk-reward for the OMCs are favorable as US-China trade discord and weakening global economy will prevent any sharp rise in crude prices. Post Central elections, risk of government intervention on marketing margins is also likely to come down significantly. As a result, we increase our marketing margin assumptions (from Rs1.75 to Rs2.8/litre for FY20E) and target multiples to 10x PER FY20E against 8x earlier. BPCL/HPCL are top picks.
SOURCE: Data from D'Market via Quandl. Intraday data delayed 15 minutes.
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