Hindustan Petroleum Corporation (HPCL IN) – Q2FY26 Result Update – Earnings beat led by refining & marketing performance – Downgrade to ‘HOLD’
Published on 31 Oct 2025
HPCL’s Q2FY26 refining throughput rose 4.3% YoY to 6.6mmt (0.2mmt above estimates) but dipped 1.4% QoQ, with reported GRM at USD 8.8/bbl. (Ple: USD7.0/bbl), including an inv. gain of USD0.8/bbl. Marketing volumes met our expectation at 12.1mmt in Q2FY26 with an implied GMM of Rs5.9/lit (Ple: Rs4.9/lit) aided by an inventory gain of Rs5.7bn vs loss of Rs.6.5bn in Q1FY26. Improvement in GRM & GMM led to 152.9% YoY increase in standalone EBITDA (incl. forex loss of Rs7.3bn) to Rs68.9bn (Ple Rs53.6bn, BBGe Rs58.1bn). Improved performance in Q1/Q2FY26 led to a 200.0%/737.6% YoY growth in EBITDA/PAT in H1FY26, albeit on a lower base last quarter. Co. declared Rs.5/per share of interim equity dividend this quarter. We continue to build in a GRM of USD7/bbl for FY27E/28E each. On the marketing front, we estimate GMM at Rs5.6/5.3/lit for FY27E/28E. Standalone debt/equity ratio stands at 1.1x vs 1.4x QoQ. However, if we consolidate debt of HMEL and HRRL, the debt/equity ratio increases to 1.8x as of Q2FY26, which remains a concern. Moreover, the recent rally limits further upside potential and the stock appears fairly valued. Therefore, we downgrade the stock to “Hold” from Accumulate with a target price of Rs476, valuing it at 1.3x FY27/28E PBV.
