HPCL shares slumped nearly 4.5 per cent on Tuesday, following the state-run refiner’s June quarter earnings announcement yesterday. HPCL on Monday reported a 30 per cent year-on-year rise in Q1 profit at Rs 2,098 crore, boosted by one-time inventory gain of Rs 1,100 crore.
Analysts said that such inventory gains may not be sustainable going ahead.
HPCL’s sales fell 13 per cent to Rs 44,840 crore. Religare Securities said that HPCL’s marketing volumes declined 1.4 per cent sequentially to 8.9 MMT.
“Prima facie, it seems HPCL is losing market share as its market sales growth (4 per cent year-on-year) underperformed overall consumption growth (nearly 7 per cent year-on-year for Q1FY17). This implies HPCL’s marketing business margins could come under stress,” the brokerage added.
Gross refining margin or the earnings from turning every barrel of crude oil into fuel, were in-line at $6.8 per barrel during the quarter, and outperformed the Singapore complex benchmark by $1.83 per barrel.
“The reason for this outperformance is unclear due to limited data available currently,” said Religare Securities.
The brokerage retained its “hold” call on HPCL, saying the company will find it tough to sustain market share post Indian Oil Corp’s Paradip refinery ramp-up.
CLSA however downgraded HPCL to “sell” from “buy”, citing the sharp rally in the stock since February lows. HPCL shares are up 45 per cent in the last three months and nearly 90 per cent since the February lows. CLSA has a target price of Rs 1,140 on HPCL.
HPCL said yesterday that its board had recommended a 2:1 bonus issue.
As of 11 a.m., HPCL shares traded 3.7 per cent lower at Rs 1,170, underperforming the broader Nifty that was down 0.08 per cent.