HINDPETRO - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 05 Nov 25, 7:43 am

Fundamental Rating: 4.2

📊 Financial Overview: Hindustan Petroleum Corporation Ltd (HINDPETRO) presents a compelling value case with a P/E of 6.93, significantly below the industry average of 20.7. The company posted a 507% YoY profit surge in Q2, with PAT at ₹3,830 Cr. Return metrics are solid, with ROE at 16.9% and ROCE at 11.8%. However, the debt-to-equity ratio of 1.16 indicates moderate leverage. The PEG ratio of 1.26 suggests fair valuation relative to growth.

💼 Business Model & Competitive Edge: HPCL is a Maharatna PSU engaged in refining, marketing, and distribution of petroleum products. It operates two major refineries and has a vast retail network across India. Its strategic importance, government backing, and integration with ONGC provide stability. The company benefits from rising fuel demand and improving refining margins, which doubled to $8.80/barrel in Q2

The Hindu

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📉 Valuation & Entry Zone: Trading near its 52-week high of ₹484, the stock shows strong momentum. With RSI at 66.9 and MACD at 9.79, it’s approaching overbought territory. A good entry zone would be around ₹430–₹445, near its 50 DMA, offering a better margin of safety.

📈 Long-Term Holding Guidance: HPCL is a strong long-term hold due to its low valuation, improving margins, and strategic positioning in India’s energy infrastructure. Investors should monitor crude price trends and refining spreads for future performance.

✅ Positive

• Low P/E ratio offers deep value
• Strong YoY profit growth of 507%
• Improved refining margins boost profitability
• FII holdings increased by 0.93%

⚠️ Limitation

• High debt-to-equity ratio (1.16)
• Sequential PAT decline from ₹4,371 Cr to ₹3,830 Cr
• DII holdings declined by 0.92%

📉 Company Negative News

• Operational issues at Mumbai refinery due to crude quality concerns

  Business Today

• Sequential drop in PAT despite strong YoY growth

📈 Company Positive News

• Q2 PAT rose six-fold YoY aided by better refining margins

  The Hindu

• Announced ₹5 dividend, signaling confidence in cash flows

  The Hindu

• Stock up 26.38% YoY, outperforming Nifty and Nifty Energy indices

  Business Standard

🏭 Industry

• Oil & gas sector benefits from rising energy demand and stable crude prices
• Government support for PSU refiners ensures long-term viability
• Industry P/E of 20.7 highlights HPCL’s undervaluation

🧾 Conclusion

HINDPETRO offers strong value with low valuation metrics, robust profit growth, and strategic importance in India’s energy sector. While debt levels and operational risks exist, long-term prospects remain attractive. Investors may consider accumulating near ₹430–₹445 for optimal entry.

Sources

Business Standard

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