Hindustan Petroleum Corporation are more or less dependent on crude prices in the international market and one can couple the same with rate of Indian rupee vs dollar. go through the below info to arrive at a decision to buy or sell a stock.
Hindustan Petroleum Corporation (HPCL), a Fortune 500 company, is engaged in refining and marketing of petroleum products in India. It operates two refineries with 16.3 mmtpa capacity in FY11 and has ~18% share in marketing of petroleum products. HPCL, in a joint venture with Mittal Energy, is setting up a 9 mmtpa refinery at Bhatinda, which would be operational in FY12E
We believe capacity expansion, increase in retail sales volume and higher refining margins would create value for investors, going forward. Also, government policy and reforms in the pricing of sensitive petroleum products could reduce net underrecoveries of the company. We have assumed Brent crude oil prices of US$100 per barrel and net under-recoveries of 8.8% for OMCs in FY13E
HPCL is trading at 7.5x FY12E and 6.3x FY13E EPS of | 46.1 and | 55.2. HPCL’s book value of | 439 in FY13E also offers good risk reward ratio to long-term investors. Sustained higher crude oil prices and adverse government policy remain risks to our recommendation
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