HPCL share price surges 24% in 9 days: Here's why
In the last nine days, India's Hindustan Petroleum Corporation Limited (HPCL) witnessed a 24% increase in its stock price, with a 7.7% surge coming on Wednesday. This remarkable growth comes after HPCL posted robust Q2 numbers, and after several domestic brokerages either maintained or raised their target prices for the stock. Here are some reasons behind the stock's exponential rise.
Decline in crude oil prices contributes to OMC rally
A drop in crude oil prices has played a significant role in the success of oil marketing companies (OMC). On Tuesday, oil prices plunged over 4% to their lowest point since late July, as the dollar gained strength and concerns about tight markets eased due to mixed Chinese economic data and increased OPEC exports. Brent crude prices fell below $84 per barrel for the first time since the October 7 attack on Israel.
HPCL reports Q2 net profit of ₹5,827 crore
In Q2 FY24, HPCL posted a consolidated net profit of Rs. 5,826.96 crore compared to a net loss of Rs. 2,475.69 crore during Q2 FY23. This was fueled by low crude prices and a higher gross refining margin (GRM). HPCL's revenue, however, decreased 10.15% to Rs. 1 lakh crore during Q2 FY24. The company statement revealed that average GRMs for the period were $13.33 per barrel, compared to $8.41 per barrel during the corresponding period of the previous year.
Capacity expansion plans
The company is in the process of increasing its refinery capacity by 7 million metric tons per annum (MTPA) in Vizag and is set to commission the Barmer refinery, adding 9 MTPA. In Mumbai, the refinery has already expanded its capacity from 7.5 MTPA to 9.5 MTPA. Additionally, HPCL has successfully commissioned a 5 million metric ton regasification and storage terminal in Chhara.
Diversification into renewables
HPCL also plans to invest Rs. 75,000 crore over the next five years, allocating 25-30% for renewables, 20-25% for refining, and the rest for marketing. They have created a wholly-owned subsidiary to explore green businesses, including renewables, electric vehicles, and hydrogen. HPCL recently partnered with an electric vehicle technology firm Gogoro to establish battery-swapping stations across India. The company is also awaiting necessary approvals to separate its lubes business and is considering listing it or bringing in a strategic partner.
18 out of 32 brokerages maintain 'BUY'
According to CNBCTV18, among the 32 brokerages that are monitoring HPCL, 18 advise buying, eight recommend holding, and six suggest selling the stock. At the time of writing, shares of HPCL traded 7.5% higher at Rs. 299.50 apiece on the National Stock Exchange (NSE). This price level is the highest it has reached since July of this year.
