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HPCL: Beating the street

Jan 30, 2001

Hindustan Petroleum Corporation Ltd. (HPCL) has reported a strong topline growth of 42.3%. The increase in sales is due to higher realisations with petroleum prices hiked by the Government towards the end of the previous quarter (2QFY01). However, higher merchant sales also seems to have contributed to the growth.

(Rs m) 3QFY00 3QFY01 Change
Sales 92,728 131,927 42.3%
Other Income 208 723 248.3%
Expenditure 88,898 126,265 42.0%
Operating Profit (EBDIT) 3,830 5,662 47.8%
Operating Profit Margin (%) 4.1% 4.3%
Interest 328 1,088 231.8%
Depreciation 1,090 1,114 2.2%
Profit before Tax 2,620 4,184 59.7%
Tax 410 800 95.1%
Profit after Tax/(Loss) 2,210 3,384 53.1%
Net profit margin (%) 2.4% 2.6%
No. of Shares (eoy) 339 339
Diluted Earnings per share* 26.1 40.0
P/E Ratio 4.4
*(annualised)

The operating profits of the company have risen impressively. This could be driven by higher sales and the marginal improvement in OPM by 20 basis points.

The interest expense of the company has increased substantially. This is resultant to the difficult industry scenario prevailing. The rise in feedstock prices (crude oil) has increased working capital requirements. Further, with dues blocked in the oil pool account, the company has had to resort to short term borrowings to overcome the gap in working capital. This has adversely impacted the bottomline.

Despite the substantial rise in interest expense the bottomline has grown significantly. The jump in other income has provided some reprieve to the company's bottomline.

HPCL at Rs 176 is trading at a multiple of 4.4x on 3QFY01 annualised earnings. However, on 9 months annualised earnings the company is trading on a multiple of 6.2x.

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