Shares of Hindustan Petroleum Corporation Ltd (HPCL) experienced a decline of nearly 3% during early trading on Friday, October 23, hitting a low of ₹332.25 each on the BSE, compared to the previous closing price of ₹342.50.

The oil marketing giant currently boasts a market capitalisation of approximately ₹70,962 crore. The stock faced downward pressure following the company’s announcement of its second-quarter earnings in after-hours trading on October 22.

In their review of the Q2 results, brokerage firm JM Financial highlighted that the earnings surprise was primarily driven by gains from marketing inventory. Additionally, the operational performance exceeded expectations due to significantly reduced marketing losses, which the brokerage suggested could largely be attributed to inventory gains. 

Refining EBITDA reached ₹12,300 crore, surpassing the anticipated ₹11,700 crore, bolstered by a favourable gross refining margin of $32.2 per barrel. Nevertheless, refinery throughput dipped slightly to 6.2 mmt, and the overall distillate yield decreased to 75%, as noted by the brokerage.

Looking forward, JM Financial remarked, “We have made a modest upward adjustment to our FY27 EBITDA forecast, taking into account the H1FY27 results, while our estimates for FY28-29 remain unchanged.”

The firm estimates consolidated EBITDA at ₹1,236.2 crore for FY27E, increasing to ₹23,632.8 crore in FY28E and ₹24,457.2 crore in FY29E, with adjusted net profit anticipated at ₹11,498.3 crore in FY28E and ₹12,154.6 crore in FY29E.

JM Financial has retained its ‘Reduce’ rating on HPCL and slightly lowered its target price to ₹355 from ₹360, citing a minor rise in working capital debt.

The brokerage pointed to consistent historical valuations, a potential gradual recovery in H1 FY27 under-recoveries (with Brent likely to remain above $80 per barrel in the near future), and the concern that the Rajasthan refinery may achieve only a single-digit RoCE due to its high capex of ₹79,500 crore.

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