Investors hopeful for government support due to under-recoveries at BPCL and HPCL

From Business Standard: 2024-07-30 11:35:00

The market reacted positively to BPCL and HPCL’s Q1 results, despite numbers being weaker than expected. BPCL reported a GRM of $7.9 per bbl and PAT of Rs 3,000 crore, mainly due to LPG under-recoveries. Meanwhile, HPCL’s Ebitda was at Rs 2,100 crore, below consensus, affected by LPG under-recovery of Rs 2,350 crore. Concerns over government support for LPG under-recoveries in H2FY25 persist for both companies.

BPCL’s refining throughput was slightly below consensus and sales volume was flat Q-o-Q in Q1FY25. They took a hit of Rs 2,000 crore on LPG under-recoveries but hope for financial support. Russian crude discounts were stable at $3.5-4 per bbl.

HPCL recorded a GRM below estimate at $5 per bbl but had higher refining throughput and sales volumes in Q1FY25. However, the PAT was way below consensus due to LPG under-recoveries. They also incurred a negative net buffer of Rs 2,440 crore due to LPG under-recoveries.

Both BPCL and HPCL had exceptional sales volumes and increased market share in Q1FY25. HPCL commissioned new retail outlets and introduced new brands. They also achieved the highest-ever Ethanol blending ratio. Capex commitments for both companies remain high.

Investor optimism hinges on potential government support for LPG under-recoveries, as this heavily impacts the financial performance of both OMCs. Upside potential remains limited without this compensation.



Read more at Business Standard: Investors pin hope of govt support amid under-recoveries of BPCL, HPCL | Stock Market Today