HPCL shares gained 39% in November, best monthly performance since 2007; what led to the rally?
In a standout performance, Hindustan Petroleum Corporation (HPCL), a state-owned oil marketing company (OMC), outshone other large-cap stocks by a significant margin in November. During the last month, HPCL shares experienced a remarkable spike, surging from ₹249.50 apiece to ₹347.40 apiece, marking a stellar gain of 39.28%. This surge represents the stock’s most outstanding monthly performance since December 2007.
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Notably, the stock achieved a staggering 48% rally this year so far, with a remarkable 81% of this surge concentrated in the month of November alone. The phenomenal rise in the stock’s value has propelled HPCL’s market capitalisation to approach the significant ₹50,000 crore mark. At its 52-week high of ₹351 apiece, the company’s market cap reached ₹49,789 crore.
The stock gained traction after investors cheered the company’s Q2FY24 results, as the company reported a good set of numbers for the September quarter. Average GRMs were higher than in previous quarters, contributing to the stock’s upward trajectory.
According to Sonam Srivastava, Founder and Fund Manager at Wright Research, PMS, HPCL experienced a significant improvement in refining margins, benefiting from a wider spread between crude oil and refined product prices, thereby enhancing profitability.
Additionally, Srivastava highlighted that HPCL has gained from an increase in the value of its marketing inventory, positively impacting its financial results. The stock also received a boost from positive analyst sentiment, driven by the company’s robust refining margins, improved marketing margins, and ongoing expansion projects, she further pointed out.
Srivastava emphasised that the combined impact of these factors, along with HPCL’s strategic investments in refining capacity and petrochemical projects, not only reflects its current financial robustness but also paints a promising outlook, aligning with India’s increasing energy demands.
During the July–September 2023 quarter, the company posted a robust performance in the domestic market, achieving a quarterly sales volume of 10.08 MMT. This reflects a notable growth of 3.02%, outpacing the PSU industry’s growth of 2.85% in the same period.
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The company also achieved half-yearly domestic sales volume growth of 6.0% with a market share gain of 51 basis points, surpassing its PSU counterparts. Even in the face of renewed competition with the re-entry of private players in the domestic segment, HPCL maintained its market share in transport fuels.
Besides, it continues to expand its footprints in the aviation segment, registering a growth of 27.4% during April–Sep 2023 as against industry growth of 13.5% during this period.
To fortify its refining & marketing infrastructure, HPCL invested ₹7,196 crore during April–Sep 2023. This investment includes equity contributions to its joint venture companies (JVCs) and subsidiaries, as per the company’s exchange filing.
Meanwhile, domestic brokerage firm ICICI Securities has a ‘buy’ rating with a target price of ₹365 apiece.
At 02:00 PM, the stock was trading with a gain of 0.19% at ₹348 apiece.
Disclaimer: We advise investors to check with certified experts before taking any investment decisions.
