Shares of Hindustan Petroleum Corp. rose the most in more than three months after the state-run oil refiner announced a Rs 2,500-crore share buyback.
The company proposed to buy back 10 crore shares amounting to 6.56% of total equity. The buyback price of Rs 250 per share is a 33.9% premium to Wednesday's closing price, according to an exchange filing.
That comes at a time HPCL saw its net profit fall 12% over the preceding quarter to Rs 2,477.4 crore in the three months ended September. But that was higher than the estimated Rs 1,484.9 crore.
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The company's standalone revenue, however, rose 37.3% to Rs 51,773 crore, also beating the Rs 48,414-crore consensus forecast of analysts tracked by Bloomberg.
Its operating profit fell 17.2% to Rs 3,603.9 crore. Ebitda margin, too, contracted to 7% from 11.5% in the April-June quarter.
Analysts Upbeat; Cheer Buyback
According to analysts, HPCL offered deep value at current levels and the buyback was the right way to reward shareholders. Besides, inventory gains during the quarter led to a beat in estimates by the company.
Here's what some them have to say...
CLSA
- Upgrades to ‘buy' from ‘sell'; raises price target to Rs 225 from Rs 180
- Open market buyback of more than 18% of current free float is good news
- A miss on core Ebitda but inventory gains drive profit beat
- Buyback will give the right bang for buck
- Raises FY21 EPS estimates by 62% and for FY22 by 1%
- High marketing exposure puts it at an advantage versus Indian Oil and BPCL
Jefferies
- Maintains ‘buy' rating with a price target of Rs 370 apiece
- Q2 beat driven by inventory gains
- Gained market share in auto fuels during the quarter
- Buyback aimed at minorities is a positive
- Upgrades FY21 EPS estimates by 50% to factor in non-core gains
- Expects 45% EPS CAGR over FY20-23
- Valuations are at a deep discount to historical averages
- Risk-reward is favourable
Shares of HPCL gained as much as 7.9% to Rs 201.5 apiece—the highest in over a month. That compares with the Nifty 50's 1.18% rise.
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