Hold HPCL; target of Rs 1239: Edelweiss

Hindustan Petroleum (HPCL) reported a stellar Q1FY17 with PAT at INR21bn (up 35% QoQ and 30% YoY), sharply ahead of our and Street’s estimates. The beat was led by better than expected GRM of USD6.8/bbl (Edel estimate: USD5.8/bbl) aided by inventory gains of INR11bn. Q2FY17 will likely be mixed as: 1) benchmark GRMs are down 14% QoQ; and 2) range-bound oil price will limit inventory gains. However, diesel retail margins have surged ~50% QTD. The highly profitable Bhatinda refinery will continue to drive consolidated earnings. On stronger GRMs from standalone and Bhatinda refineries, we raise our target price to INR1,239 (INR951 earlier). Maintain ‘HOLD’.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.