HPCL Shares Gain The Most In Three Months After Buyback Proposal
HPCL gas station. (Prashanth Vishwanathan/Bloomberg) 

HPCL Shares Gain The Most In Three Months After Buyback Proposal

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.

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.

HPCL Shares Gain The Most In Three Months After Buyback Proposal
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