Mumbai, August 8, 2025: Hindustan Petroleum Corporation Ltd. (HPCL) announced its financial results for the first quarter of FY26, highlighting a resilient performance in marketing margins despite headwinds in refining operations due to weaker-than-expected Gross Refining Margins (GRMs).
Financial Highlights:
- Refining Throughput: 6.66 million metric tonnes (mmt)
- Reported GRM: USD 3.08/bbl (vs USD 5.0/bbl in Q1FY25 and USD 8.4/bbl in Q4FY25)
- Implied Gross Marketing Margin (GMM): Rs 7.0/litre (vs Rs 3.0/litre in Q1FY25)
- Standalone EBITDA: Rs 76 billion – up 261% YoY
- Total Sales Volume (including exports): 13 mmt
- Debt Reduction: From Rs 633 billion at FY25-end to Rs 510 billion in Q1FY26
Despite a reported GRM miss—largely driven by a USD 3.5/bbl inventory loss—HPCL managed to deliver a strong YoY EBITDA growth, supported by healthy marketing margins. The reported GRM fell short of expectations (PLe: USD 6.2/bbl), though core GRM was higher at USD 6.6/bbl.
The company also incurred an under-recovery of Rs 21.5 billion on LPG sales during the quarter. Cumulative under-recoveries on LPG have reached Rs 130 billion. Industry experts believe that given the robust GMM on petrol and diesel, the LPG under-recovery may remain uncompensated.
Strategic and Operational Updates:
- Pre-commissioning underway at the Vizag bottom-upgradation project
- Barmer Refinery: 95% complete; Petrochemical complex 73% complete
- First crude expected at Barmer by FY26-end
- Targeting Rs 10–15 billion EBITDA improvement through operational efficiencies
- Inventory losses: Rs 14 billion in refining, Rs 6 billion in marketing
- Russian crude accounted for 13.2% of crude basket in Q1FY26
- LPG under-recovery stood at ~Rs 165 per cylinder
- Chhara LNG terminal utilization expected to rise to 35–40% in FY27 post breakwater completion
Outlook and Valuation:
The company expects GRMs to rebound to the long-term average of USD 5–7/bbl in FY26–27, and has built in USD 6/7 for FY26/27E in its forecasts. Similarly, GMM is projected at Rs 4.4/4.5/4.9 per litre for FY25/26/27E.
With improving marketing margins, reduction in debt, and anticipated recovery in refining margins, analysts have upgraded HPCL’s stock rating to ‘Accumulate’ with a revised target price of Rs 422 (earlier Rs 360), valuing the company at 1.3x FY27 PBV.