28 May 2016
4QFY16 Results Update | Sector: Oil & Gas
HPCL
BSE SENSEX
26,654
Bloomberg
Equity Shares (m)
M.Cap.(INR b)/(USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, (INR m)
Free float (%)
S&P CNX
8,157
HPCL IN
338.6
315.2 / 4.7
991/615
6/13/51
1,140
48.9
CMP: INR931
TP: INR1,359 (+46%)
Buy
EBITDA in-line, PAT beat; strong turnaround in Bhatinda; expect re-rating
Financials & Valuations (INR b)
Y/E Mar
2016 2017E 2018E
Net Sales
1,792.8 1,638.9 1,844.1
EBITDA
76.2
79.7
89.6
PAT
38.6
40.0
43.3
EPS (INR)
113.9
118.1
127.7
Gr. (%)
41.3
3.7
8.1
BV/Sh (INR)
546.2
622.9
705.8
RoE (%)
22.4
20.2
19.2
RoCE (%)
11.4
11.1
11.0
P/E (x)
8.2
7.9
7.3
P/BV (x)
1.7
1.5
1.3
Estimate change
TP change
Rating change
HPCL’s reported 4QFY16 EBITDA of INR25.9b (inline) supported by GRMs at
USD7.6/bbl. Full year subsidy sharing at nil, as government reversed 3QFY16
sharing. PAT stood at INR15.5b (est. of INR14b; -28% YoY, +49% QoQ) and beat was
due to (a) higher other income at INR4.8b (est 2.8) and (b) lower tax rate at 29.5%
(est. 33%). Full year FY16 standalone EPS stands at INR114/sh (+41% YoY) and cons
EPS at INR145 (3.3x YoY) driven by Bhatinda refinery turnaround. Dividend yield
attractive at ~4%. Maintain
Buy.
EBITDA in line:
HPCL reported 4QFY16 EBITDA of INR25.9b, (-25% YoY, +19%
QoQ) led by GRM of USD7.6/bbl (est USD7.5/bbl; +1% YoY, -4% QoQ). Variation
in EBITDA on YoY and QoQ basis is explained by marketing margins which stood
at ~INR2/ltr in 4QFY16 (vs regulated INR1.4/ltr). In contrast to peers, HPCL
reported minor adventitious inventory gains at INR290m. Forex loss stood at
INR490m.
Nil subsidy share in FY16:
9MFY16 subsidy was reversed in 4QFY16 leaving
almost nil sharing at INR86m in FY16. In line with FY16, we model OMCs’
subsidy sharing at nil in FY17/FY18.
Strong marketing volume growth:
While, the marketing sales stood at 9.1mmt
(+11% YoY, +5% QoQ), refinery throughput was at 4.7mmt (+6% YoY, +3%
QoQ). HPCL’s gross debt as of 4QFY16 stands at INR213b (vs INR203b on March
31, 2015)
Valuation and view:
With inventory losses now largely behind and marketing
margins steadily increasing over regulated era, earnings quality has improved.
We believe HPCL is now a structural investment play - led by higher earnings
predictability and increase in profitability leading to higher RoEs.
Commensurate re-rating pending, in our view.
We increase our FY17/FY18 EPS by ~6%/3% to factor in higher marketing
volumes and other income. We value HPCL at 5.5x for refining and 8x for
marketing to arrive at a fair value of INR1,359 (vs INR1,287 earlier) implying a
46% upside. On FY17/FY18E, the stock trades at 7.9x/7.2x FY17E/FY18E
standalone EPS of INR118/INR130 and 1.5/1.3.x FY17E/FY18E BV.
Buy.
Harshad Borawake
(HarshadBorawake@MotilalOswal.com); +91 22 3982 5432
Rajat Agarwal
(Rajat.Agarwal@MotilalOswal.com); +91 22 3982 5558
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
HPCL
Exhibit 1: HPCL Quarterly and Half-yearly earnings snapshot (INRm)
Key Operating Metrics
Brent (USD/bbl)
Fx rate (INR/USD)
Marketing volume (mmt)
GRM (USD/bbl)
Reuters Singapore GRM (USD/bbl)
Refinery thr' put (mmt)
Financial Summary (INRm)
Net Sales
Adj. EBITDA
Refining
Marketing & others
EBITDA Margin (%)
Adventitious gain/(loss)
Net subsidy gain/(loss)
Forex gain/(loss)
Reported EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
PBT b/f exceptionals
Exceptionals
PBT
Income Tax
Tax rate (%)
PAT
PAT margin (%)
EPS
1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16
1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16
109.7
102.0
77.0
55.2
61.9
50.2
45.0
32.9
59.8
60.5
61.9
62.2
63.7
65.0
66.0
67.3
8.3
7.4
8.1
8.2
8.6
7.9
8.7
9.1
2.0
2.1
(1.0)
7.5
8.6
2.7
7.9
7.5
5.8
4.8
6.3
8.6
8.0
6.3
8.0
7.7
3.3
4.5
4.0
4.5
3.8
4.2
4.6
4.7
1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16
591,517 516,332 510,452 445,503 517,204 420,036 434,311 421,260
15,517
347
15,170
2.6%
(8,310)
(4,949)
3,000
5,258
0.9%
(5,897)
(639)
(1,295)
2,620
685
685
(225)
32.8%
460
0.1%
1.4
10,256
654
9,602
2.0%
17,225
(5,091)
22,316
3.4%
33,339
11,566
21,772
7.5%
(430)
40
1,540
34,489
7.7%
(5,549)
28,940
(1,532)
5,431
32,839
24,499
11,901
12,598
4.7%
14,159
1,896
12,263
3.4%
26,842
13,471
13,370
6.2%
(4,220)
(430)
(480)
21,711
5.0%
(6,978)
14,733
(1,610)
2,732
15,855
15,855
(5,433)
34.3%
10,423
2.4%
30.7
26,041
13,311
12,729
6.2%
0
370
(490)
25,921
6.2%
(6,754)
19,167
(1,913)
4,771
22,025
YoY (%) QoQ (%)
YoY (%) QoQ (%)
-40%
-27%
8%
2%
11%
5%
1%
-4%
-10%
-4%
6%
3%
YoY (%) QoQ (%)
-5%
-3%
-22%
15%
-42%
-3%
-1%
-5%
6,410
(18,000)
(81)
30
(1,140)
(270)
15,445
(1,015)
3.0%
-0.2%
(3,880)
11,565
(1,869)
3,308
13,004
13,004
(4,502)
34.6%
8,502
1.6%
25.1
(4,386)
(5,401)
(2,370)
2,783
(4,987)
5,830
(14,040)
3
(24)
(530) (1,360)
29,802
(1,265)
5.8%
-0.3%
(7,508)
22,294
(1,227)
3,138
24,204
24,204
(8,324)
34.4%
15,880
3.1%
46.8
(5,428)
(6,693)
(1,650)
3,640
(4,703)
(4,703)
1,499
31.9%
(3,205)
-0.8%
(9.5)
n.a.
825%
-132%
-25%
n.a.
n.a.
n.a.
19%
n.a.
-34%
n.a.
-12%
-33%
n.a.
30%
n.a.
75%
39%
(4,987)
32,839
1,733
(11,215)
34.8%
34.2%
(3,254)
21,624
-0.6%
4.9%
(9.6)
63.8
22,025
-33%
39%
(6,495)
n.a.
n.a.
29.5%
15,529
-28%
49%
3.7%
45.8
-28%
49%
Source: Company, MOSL
Exhibit 2: Ad-hoc subsidy sharing resulting in volatile quarterly profits (INRb)
PAT
Net (under)/over recovery
Source: Company, MOSL
28 May 2016
2
 Motilal Oswal Financial Services
HPCL
Exhibit 3: HPCL Marketing volume trend – up 11% YoY and up 5% QoQ (mmt)
7.7
7.2
7.7
7.8
7.9
7.2
7.8
8.0
8.3
7.4
8.1
8.2
8.6
7.9
8.7
9.1
1Q
2Q
FY13
3Q
4Q
1Q
2Q
FY14
3Q
4Q
1Q
2Q
FY15
3Q
4Q
1Q
2Q
FY16
3Q
4Q
Source: Company, MOSL
Exhibit 4: HPCL GRM trend – 4QFY16 GRM at USD7.5/bbl (USD/bbl)
(In USD/bbl)
9.1
6.7
6.3
4.4
1.9
3.7
2.6
HPCL GRM
8.7
6.6
5.4
4.3
3.8
4.7
2.4
2.0
2.1
(1.0)
2.7
6.2 5.8
4.8
6.3
7.5
Singapore GRM
8.6
8.0
8.6
6.3
8.0
7.9
7.7
7.5
(2.1)
Source: Company, MOSL
Exhibit 5: HPCL refinery-wise throughput trend; down 6% YoY, flat QoQ (mmt)
Refinery thr'put (mmt)
3.6
2.0
1.6
1Q
3.7
1.5
2.1
2Q
FY13
4.2
2.2
4.4
3.4
2.4
1.7
1.7
1Q
3.9
1.9
Mumbai
3.8
1.9
4.4
3.3
2.3
1.9
2.0
4Q
1.4
1Q
2.0
2Q
FY15
2.5
2.0
2.4
Visakh
Total
4.5
4.0
4.5
3.8
2.1
4.2
2.1
4.2
2.5
4.2
2.5
2.0
3Q
2.0
4Q
2.0
2Q
FY14
2.0
3Q
1.9
3Q
2.0
4Q
1.6
1Q
2.1
2Q
FY16
2.1
3Q
2.2
4Q
Source: Company, MOSL
28 May 2016
3
 Motilal Oswal Financial Services
HPCL
Exhibit 6: HPCL under recovery quarterly trend (INRb)
Upstream Sharing
150
120
90
60
30
0
-30
-60
1Q
2Q
FY13
3Q
4Q
1Q
2Q
FY14
3Q
4Q
1Q
2Q
FY15
3Q
4Q
1Q
2Q
FY16
Source: Company, MOSL
3Q
4Q
107
83
87
85
58.3
Oil Bonds/Cash
82.3
92.2
Net Under/(over) recovery
91.8
66.2
51.6
35.8
Gross Under recovery
10.5
6.7
5.5
4.8
2.5
Exhibit 7: Industry level gross under recoveries have come down sharply; LPG shifted to DBTL (INRb)
Gross under recoveries
HPCL + BPCL + IOCL (INRb)
436
70
66
299
-
1Q
325
215
63
60
92
-
2Q
65
73
187
-
3Q
406
87
78
241
-
4Q
Petrol
478
115
73
290
-
1Q
378
70
71
236
-
2Q
393
110
77
207
-
3Q
362
105
75
182
-
4Q
254
85
64
105
-
1Q
354
93
75
186
-
2Q
398
127
85
185
-
3Q
393
159
82
152
-
4Q
287
121
75
90
-
1Q
224
125
73
26
-
2Q
Diesel
PDS Kerosene
Domestic LPG
Total
159
103
64
-
(7)
3Q
53
17
36
-
4Q
39
0
39
-
1Q
32
0
32
-
2Q
29
0
29
-
3Q
15
0
15
-
4Q
FY12
FY13
FY14
FY15
FY16
Source: PPAC, Industry, MoPNG
Exhibit 8: HPCL was compensated for the subsidy shared in 3QFY16; total FY16 sharing is minimal
INRb
1Q
Gross Under recovery 107
34
Upstream Sharing
0
Oil Bonds/Cash
Net Under/(over)
73
recovery
69
As a % of Gross
FY13
2Q 3Q
83
87
33
33
67
55
-17
-2
-20
-2
4Q 1Q
85 58.3
11 34.9
126 18.2
-52 5.2
-61
8.9
FY14
2Q 3Q
82.3 92.2
39.1 37.0
41.3 23.3
2.0 31.9
4Q 1Q
91.8 66.2
56.7 36.1
69.4 25.2
-34.3 4.9
7.5
FY15
2Q 3Q 4Q
51.6 35.8 10.5
37.5 24.5 10.6
14.0 11.4 0.0
0.1 0.0 0.0
0.2 -0.1 -0.4
FY16
1Q 2Q
6.7 5.5
2.2 1.6
4.5 3.9
0.0 0.0
0.0
0.4
4QFY16 (%)
3Q 4Q
4.8 2.5
0.0 -1.9
4.4 4.8
0.4 -0.4
8.9 -14.6
Source: Company, MOSL
YoY
QoQ
-76%
-1.2
nm
nm
-48%
nm
0.1
-1.9
2.4 34.6 -37.3
Other key highlights
Other expenses included one-off expenses like INR2.2b towards higher rental in
Delhi and INR810m for LPG segment.
Model nil subsidy sharing by OMCs with the shift in LPG to DBTL. Our subsidy
sharing assumptions are at INR14/kg in LPG and INR12/ltr in kerosene and the
rest will be borne by the upstream companies.
OMC’s were recovering prior period entry tax through higher retail prices and
the recovery will be complete in May-16 and to that extent the marketing
division profitability will be lower in FY17.
HPCL’s dividend payout ratio of 30% is on standalone basis.
4
28 May 2016
 Motilal Oswal Financial Services
HPCL
Exhibit 9: Government has increased auto fuel excise duty sharply in last few quarters
Petrol Excise (INR/ltr)
17.5 17.5
Diesel Excise (INR/ltr)
20.5 21.5 21.5 21.5 21.5
19.1 19.4
17.3 17.3 17.3 17.3
13.8 13.8 14.8 14.8
9.5 9.5
2.1
11.0
13.3
15.4
15.8
8.2
11.8
10.3 10.3 10.7
4.7
3.7 3.7
6.1
3.6 3.6 5.1
*Ad-valorem duty in nil since Jan-08
Source: PPAC, MoPNG, MOSL
Exhibit 10: Auto Fuel Retail Price trend in India – Despite excise duty hikes, auto fuel prices
still below their peak levels
80
70
60
50
40
30
20
Diesel monthly
price hikes begin
Diesel
de-regulated
51.67
Petrol
de-regulated
Gasoline price (INR/ltr)
Diesel price (INR/ltr)
63.02
Source: PPAC, MoPNG, MOSL
28 May 2016
5
 Motilal Oswal Financial Services
HPCL
Valuation and view
Widening Moat:
OMCs’ economic moat is widening, led by (1) scope for
meaningful increase in marketing margins and profitability, (2) slower ramp-up
by private marketers, (3) high volume growth, aided by expected GDP boost,
and (4) improving balance sheet with increasing cash flow.
OMCs profit normalization was delayed for a decade:
OMC’s deregulation and
in turn their profit normalization had been derailed for a decade after an earlier
brief de-regulation period in 2004-06. However, this time around we believe
government will stay put with its deregulation decision given the hard lessons of
financial stress of last decade. Increased excise duties offer some flexibility to
moderate prices in event of spike in oil prices, but huge and growing India
consumption volumes will make it practically impossible to again revisit the
price control model.
Marketing division to drive profitability:
Post de-regulation, we expect
marketing division profitability to grow rapidly, hence should also command a
higher valuation. An INR0.5/ltr increase in petrol and diesel marketing margins
increases HPCL’s FY18E EPS by 25%. We model gross per liter diesel margin of
INR1.9/2.2 in FY17/FY18.
Pure play marketing companies trade at higher valuations:
Pure play
petroleum marketing companies - US based CST Brands (CST US; M Cap:
USD2.9b) and New Zealand based Z Energy (ZEL NZ; M Cap: USD2b) trade at 10x
EV/EBITDA. These valuations (in-line with the underlying business dynamics) are
more similar to consumer business than refining or oil & gas.
We increase our FY17/FY18 EPS by ~6%/3% to factor in higher marketing
volumes and other income. We value HPCL at 5.5x for refining and 8x for
marketing to arrive at a fair value of INR1,359 (vs INR1,287 earlier) implying a
46% upside. On FY17/FY18E, the stock trades at 7.9x/7.2x FY17E/FY18E
standalone EPS of INR118/INR130 and 1.5/1.3.x FY17E/FY18E BV. Maintain
Buy.
Exhibit 11: HPCL – Key Assumptions
Exchange Rate (INR/USD)
Brent Crude (USD/bbl)
Market Sales (MMT)
YoY (%)
GRM (USD/bbl)
HPCL Blended GRM
Reuters Singapore GRM
Prem/(disc)
Refining capacity utilization (%)
Total Refinery throughput (MMT)
YoY (%)
Gross under recoveries
Net sharing (%)
EPS
FY09
45.8
84.8
25.4
3.8%
5.17
5.75
(0.58)
118%
16.5
-1.5%
213
0%
12.8
FY10
47.5
69.6
26.3
3.5%
2.97
3.55
(0.58)
116%
16.3
-1.5%
100
12%
38.4
FY11
45.7
86.5
27.0
2.9%
4.47
5.18
(0.70)
106%
15.8
-3.1%
171
9%
45.4
FY12
47.9
114.5
29.5
9.1%
5.20
8.17
(2.96)
99%
16.1
1.9%
304
0%
26.9
FY13
54.5
110.6
30.3
2.8%
2.08
7.70
(5.62)
98%
15.8
-1.4%
362
1%
26.7
FY14
60.6
107.8
31.0
2.1%
3.43
5.62
(2.19)
95%
15.4
-2.6%
325
1%
51.1
FY15
61.1
86.0
32.0
3.2%
2.84
6.36
(3.52)
101%
16.4
6.3%
164
3%
80.6
FY16
65.5
47.5
33.9
6.0%
6.67
7.49
(0.82)
106%
17.2
5.1%
20
0%
113.9
FY17E
68.0
45.0
35.8
5.8%
5.15
7.30
(2.15)
106%
17.1
-0.8%
21
0%
118.1
FY18E
70.0
50.0
37.7
5.3%
5.25
7.30
(2.05)
106%
17.1
0.0%
24
0%
127.7
Source: Company, MOSL
28 May 2016
6
 Motilal Oswal Financial Services
HPCL
Story in charts
Exhibit 12: HPCL’s GRMs have underperformed Singapore
GRM (USD/bbl)
Prem/(Disc) to Singapore
Singapore GRM
7.7
8.2
3.6
3.0
(0.6)
5.2
4.5
(0.7)
5.2
2.1
(3.0)
(5.6)
3.4
(2.2)
5.6
HPCL Blended GRM
6.4
7.4
6.2
2.8
(3.5)
(1.3)
7.3
5.2
(2.1)
7.3
5.3
(2.1)
26
27
29
30
Exhibit 13: While refining capacity has been largely flat,
marketing sales have shown steady increase
Marketing Sales (mmt)
Refinery Throughput (mmt)
32
34
36
38
31
17
FY10
16
16
FY12
16
16
FY14
15
16
17
17
FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E
Source: Company, MOSL
FY16E
FY18E
Source: Company, MOSL
Exhibit 14: Expect EBITDA to be driven up higher marketing
margins
EBITDA (INRb)
PAT (INRb)
76
52
25
13
FY10
33
34
39
9
15
9
FY12
17
FY14
27
54
39
40
80
90
Exhibit 15: Expect D/E ratio to decline with increasing
profitability (x)
D/E Ratio
1.8
2.0
2.3
2.4
2.1
43
1.1
0.8
0.7
0.6
FY16E
FY18E
FY10
FY12
FY14
FY16E
FY18E
Source: Company, MOSL
Source: Company, MOSL
Exhibit 16: Diesel deregulation to reduce working capital
leading to lower interest costs
Total Debt (INRb)
17
18
15
Interest Cost (INRb)
Exhibit 17: HPCL: 1 Year Forward P/E Chart
30
23
16
P/E (x)
5 Yrs Avg(x)
15 Yrs Avg(x)
10 Yrs Avg(x)
9
9
7
298
FY12
325
FY13
319
FY14
171
6
145
6
145
6
145
9
2
9.3
7.2
9.2
7.3
213
FY10
250
FY11
FY15 FY16E FY17E FY18E
Source: Company, MOSL
Source: Company, MOSL
28 May 2016
7
 Motilal Oswal Financial Services
HPCL
Financials and Valuations
Income Statement
Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
Reported PAT
Adjusted PAT
Change (%)
2011
1,309,342
19.9
33,088
2.5
14,070
19,018
8,840
13,435
-152
23,461
8,071
34.4
0
15,390
15,390
18.3
2011
3,390
122,068
125,458
250,212
31,956
407,626
296,484
110,039
186,445
37,987
113,350
265,910
166,223
26,544
800
72,343
196,066
178,018
18,048
69,844
407,626
2012
1,781,392
36.1
34,082
1.9
17,129
16,953
16,977
12,222
-5
12,192
3,077
25.2
0
9,115
9,115
-40.8
2012
3,390
127,835
131,225
298,312
30,853
460,390
334,590
126,094
208,496
44,445
103,705
354,427
194,545
35,652
2,264
121,967
250,683
230,847
19,836
103,744
460,390
2013
2,065,293
15.9
39,424
1.9
19,315
20,109
18,377
12,300
714
14,746
5,699
38.6
0
9,047
9,047
-0.7
2013
3,390
133,874
137,264
324,583
35,984
497,830
370,062
144,575
225,487
51,729
106,269
378,962
164,387
49,350
1,471
163,754
264,617
241,622
22,995
114,345
497,830
2014
2,231,454
8.0
52,081
2.3
21,884
30,197
15,046
11,004
0
26,155
8,817
33.7
0
17,338
17,338
91.6
2014
3,390
146,732
150,122
319,301
39,084
508,506
424,668
165,545
259,122
45,856
108,598
362,204
187,754
54,660
347
119,444
267,275
243,978
23,296
94,930
508,506
2015
2,063,804
-7.5
54,176
2.6
19,712
34,465
7,066
14,142
0
41,541
14,209
34.2
0
27,333
27,333
57.6
2015
3,390
156,831
160,221
170,556
41,036
371,813
481,749
191,121
290,628
34,744
112,415
237,719
129,723
36,031
171
71,796
303,693
273,903
29,790
-65,974
371,813
2016
1,792,811
-13.1
76,168
4.2
26,668
49,500
6,401
14,282
0
57,381
18,753
32.7
0
38,627
38,627
41.3
2016
3,390
181,775
185,165
145,220
48,105
378,490
541,493
217,789
323,705
30,000
109,947
241,865
127,091
42,296
1,483
70,995
327,027
305,459
21,568
-85,162
378,490
2017E
1,638,862
-8.6
79,655
4.9
28,925
50,731
5,518
14,549
0
59,761
19,721
33.0
0
40,040
40,040
3.7
2017E
3,390
207,774
211,164
145,220
54,081
410,465
615,493
246,713
368,780
8,000
115,694
257,005
121,027
38,664
33,620
63,695
339,015
306,172
32,843
-82,009
410,465
(INR Million)
2018E
1,844,080
12.5
89,605
4.9
32,275
57,330
5,518
13,795
0
65,607
22,306
34.0
0
43,301
43,301
8.1
Balance Sheet
Y/E Mar
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
E: MOSL Estimates
(INR Million)
2018E
3,390
235,884
239,274
145,220
60,641
445,135
675,493
278,988
396,505
28,000
115,694
253,954
135,402
43,505
11,352
63,695
349,018
314,532
34,486
-95,064
445,135
28 May 2016
8
 Motilal Oswal Financial Services
HPCL
Financials and Valuations
Ratios
Y/E Mar
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
RoIC
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Leverage Ratios (%)
Net Debt/Equity (x)
Y/E Mar
Adjusted EBITDA
Non cash opr. exp (inc)
(Inc)/Dec in Wkg. Cap.
Tax Paid
Other operating activities
CF from Op. Activity
(Inc)/Dec in FA & CWIP
Free cash flows
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax) & Others
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
E: MOSL Estimates
2011
45.4
86.9
370.1
14.0
36.1
2012
26.9
77.4
387.1
8.5
37.0
2013
26.7
83.7
404.9
8.5
37.3
2014
51.1
115.7
442.8
15.5
35.5
2015
80.6
138.8
472.6
24.5
35.6
11.5
6.7
2.0
0.2
7.7
2.6
12.8
5.6
5.6
4.8
7
7.1
5.0
4.5
5.6
6
6.7
4.2
3.8
5.9
8
12.1
5.4
5.8
5.6
9
17.6
7.3
7.8
4.6
8
2016
113.9
192.6
546.2
34.5
35.4
8.2
4.8
1.7
0.2
5.2
3.7
22.4
11.4
14.4
3.5
8
2017E
118.1
203.4
622.9
35.4
35.1
7.9
4.6
1.5
0.2
4.6
3.8
20.2
11.1
13.9
2.8
9
2018E
127.7
222.9
705.8
38.3
35.1
7.3
4.2
1.3
0.2
4.4
4.1
19.2
11.0
13.9
2.9
8
2.0
2011
33,088
10,913
-25,876
-5,645
-2,456
10,024
-46,101
-36,077
5,371
12,330
-28,400
0
30,408
-8,933
-4,731
16,744
-1,631
2,431
800
2.3
2012
34,082
16,632
-27,301
-2,715
-5,407
15,291
-41,359
-26,068
6,378
3,579
-31,401
0
37,919
-14,836
-5,509
17,574
1,464
800
2,264
2.4
2013
39,424
14,859
-30,945
-1,072
-10,771
11,496
-36,807
-25,312
-2,404
15,383
-23,828
0
37,072
-22,187
-3,344
11,540
-793
2,264
1,471
2.1
2014
52,081
9,322
21,121
-3,668
-1,556
77,301
-41,358
35,943
-1,297
10,289
-32,365
0
-25,648
-17,045
-3,367
-46,060
-1,124
1,471
347
1.1
2015
54,176
14,142
124,486
-7,622
-6,772
178,411
-41,762
136,649
4,161
-3,396
-40,997
0
-123,807
-7,647
-6,136
-137,590
-176
347
171
0.8
2016
76,168
14,282
20,500
-11,685
-5,536
93,729
-55,000
38,729
2,468
5,536
-46,996
0
-25,336
-6,401
-13,684
-45,421
1,312
171
1,483
0.5
2017E
79,655
14,549
28,984
-13,745
-6,946
102,497
-52,000
50,497
-5,748
6,946
-50,802
0
0
-5,518
-14,041
-19,559
32,137
1,483
33,620
0.6
Cash Flow Statement
(INR Million)
2018E
89,605
13,795
-9,213
-15,746
-7,188
71,253
-80,000
-8,747
0
7,188
-72,812
0
0
-5,518
-15,191
-20,709
-22,268
33,620
11,352
28 May 2016
9
 Motilal Oswal Financial Services
HPCL
Corporate profile
Company description
Fortune-500 company, HPCL is a refining and
marketing company in India and also has interests in
upstream. It owns 14.8mmt of refining capacity, split
across Mumbai (6.5mmt) and Vishakapatnam
(8.3mmt). It has a crude and product pipeline
network of ~2,400km and sells ~30mmt of
petroleum products. HPCL also holds a 16.9% stake
in MRPL and 49% stake in 9mmt Bhatinda refinery.
HPCL is a state-owned company, with 51.1%
Government of India (GoI) stake.
Exhibit 1: Sensex rebased
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%)
Promoter
DII
FII
Others
Mar-16
51.1
14.0
19.3
15.6
Dec-15
51.1
14.8
19.4
14.6
Mar-15
51.1
16.4
18.5
14.0
Exhibit 3: Top holders
Holder Name
LIC of India
HDFC Standard Life Insurance Co.Limited
National Westminister Bank PLC as Trustee
of The Jupiter India Fund
% Holding
2.6
1.5
1.2
Note: FII Includes depository receipts
Source: Capitaline
Source: Capitaline
Exhibit 4: Top management
Name
Nishi Vasudeva
J Ramaswamy
Pushp Kumar Joshi
Y K Gawali
Shrikant M Bhosekar
Designation
Chairman & Managing Director
Director (Finance) & CFO
Director (Human Resources)
Director (Marketing)
Company Secretary
Exhibit 5: Directors
Name
Nishi Vasudeva
Sandeep Poundrik
J Ramaswamy
Anand Kumar Singh
Name
Pushp Kumar Joshi
Y K Gawali
B K Namdeo
Gitesh K Shah*
Source: Capitaline
Exhibit 6: Auditors
Name
CVK & Associates
G M Kapadia & Co
Upendra Shukla
CMA Rohit J Vora
R Nanabhoy & Co
Sriramamurthy & Co
Type
Statutory
Statutory
Secretarial Audit
Cost Auditor
Cost Auditor
Branch
Source: Capitaline
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY17
FY18
MOSL
forecast
118.1
127.7
Consensus
forecast
109.8
114.5
Variation
(%)
7.6
11.6
Source: Bloomberg
28 May 2016
10
 Motilal Oswal Financial Services
HPCL
NOTES
28 May 2016
11
 Motilal Oswal Financial Services
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