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HPCL: 4QFY02 PAT up 30%

May 31, 2002

Hindustan Petroleum Corporation Ltd. (HPCL) has reported its fourth quarter and full year results. Topline growth has been sliding over the past four quarters. However, in 4QFY02, decline in growth has been less sharp compared to the preceding quarter. Sales are lower due to a combination of lower volumes and realisations.

(Rs m)4QFY014QFY02ChangeFY01FY02Change
Sales 112,232 96,305 -14.2% 445,269 396,335 -11.0%
Other Income 2,898 833 -71.3% 4,624 2,750 -40.5%
Expenditure 109,309 88,311 -19.2% 428,484 378,618 -11.6%
Operating Profit (EBDIT) 2,922 7,994 173.5% 16,785 17,717 5.6%
Operating Profit Margin (%)2.6%8.3%3.8%4.5%
Interest 975 705 -27.7% 3,873 2,947 -23.9%
Depreciation 1,158 1,573 35.8% 4,334 5,295 22.2%
Profit before Tax3,6876,54977.6%13,20212,225-7.4%
Tax 422 2,300 445.1% 2,322 4,345 87.1%
Profit after Tax/(Loss) 3,265 4,249 30.1% 10,880 7,880 -27.6%
Net profit margin (%)2.9%4.4%2.4%2.0%
No. of Shares 338.8 338.8 338.8 338.8
Diluted Earnings per share*38.550.232.123.3
P/E Ratio10.8

Operating profits have largely been buoyed by better margins during 4QFY02. OPM has increased by 5.7 percentage points during the period. The company seems to have benefited from the softer crude oil prices during the first three months of 2002. Crude oil prices were lower by 16% at 22.4/ barrel. Also, margins seem to have been boosted by oil pool claims. Margins for the full year have been lifted by the last quarter performance. For 9mFY02, OPM was 3.2%. Sale volumes for FY02 are estimated to be lower by 2%, while realisations are lower by 9%. The company seems to have received some respite from a depreciating Rupee.

Having said that, the quality of earning seems to have improved dramatically. Last year's earnings were buoyed largely by other income. A challenging operating environment over the past two years and fresh investments (Guru Gobind Sigh refinery) is likely to have put pressure on cash flows. Consequently, in FY02, other income has suffered. Adjusting for other income, pre-tax profits for the full year would be higher by 10.5%. Deferred tax has also led to lower profits.

At Rs 251, the scrip is trading on a multiple of 10.8x FY02 earnings. The scrip generally trades in a band of 3x-6x. However, markets have pulled up valuations on divestment expectations. International refining and marketing (R&M) companies trade on a multiple of 8x-12x.

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