Hindustan Petroleum Corporation (HPCL IN) – Q1FY27 Result Update – Marketing losses weigh on earnings – Downgrade to ‘REDUCE’
Published on 24 Jul 2026
HPCL's standalone EBITDA loss (incl. fx loss of INR0.2bn) widened to INR161.4bn, below street estimates (PLe: -INR149.4bn; BBGe: -INR126.7bn). However, PAT came in better than street expectations at a loss of INR115.3bn (PLe: -INR125.5bn; BBGe: -INR123.0bn), aided by tax benefits. Pre-SAED GRM improved sharply to USD23.8/bbl. This translates into an implied GMM under-recovery of INR14.9/ltr, compared with a profit of INR6.3/ltr in Q4FY26. Management expects HRRL to operate at full capacity by Q4FY27. Based on Q1FY27 performance, we revise upward our FY27E GRM estimate to USD8.7/bbl and marginally increase our FY28E estimate to USD7.9/bbl, factoring in the commissioning of the Residue Upgradation Facility (RUF) facility at Vizag (earlier FY27E/FY28E: USD7.3/7.1/bbl). We also revise our implied GMM estimates lower to an under-recovery of -INR0.5/ltr for FY27E and a profit of INR4.4/ltr for FY28E (earlier: INR2.4/4.9/ltr), as refining cracks and crude oil prices are expected to remain elevated in the near term. We downgrade HPCL to 'Reduce' from 'Hold' with a revised TP of INR350 (earlier: INR386), based on 1.1x FY28E P/BV, as the benefits of the Residue Upgradation Facility (RUF) at Vizag are expected to materialize only after the next few quarters.
