Motilal Oswal has reiterated its Buy rating on HPCL, setting a target price of Rs 590, implying a 31% upside from the current market price of Rs 450. Despite recent volatility, analysts believe HPCL's strong marketing leverage and upcoming projects will drive earnings growth over the medium term.
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Motilal Oswal Report
We continue to prefer Hindustan Petroleum Corporation Ltd. among oil marketing companies due to the following factors:
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HPCL's higher leverage toward the marketing segment,
higher dividend yield as HPCL's capex cycle is tapering off, and
the start-up of HPCL's multiple mega-projects over the next 12 months, providing a push to earnings.
HPCL currently trades at 1.3x FY27E P/B. We estimate the company to deliver 29.3%/19.9% RoE during FY26/27 and project a 3.8% FY27E dividend yield.
Our earnings assumptions remain conservative as we build in a refining gross refining margin of $6.5/barrel of oil and an motor spirit/high speed diesel gross marketing margin of Rs 3.5/litre.
We have not assumed any significant benefit from:
the start-up bottom-upgrade unit and
Project Samriddhi, which has unlocked savings worth $0.5/bbl in H1 FY26.
We reiterate our Buy rating on the stock with our SoTP-based target price of Rs 590.
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