Hindustan Petroleum Corporation Ltd (HPCL) is bracing for substantial losses in the first quarter of the current fiscal year (Q1 FY27), primarily driven by escalating crude oil prices and significant under-recoveries on the sale of petrol, diesel, and liquefied petroleum gas (LPG). This challenging outlook comes despite the oil marketing company (OMC) reporting a strong performance in the preceding March quarter.
Brokerages Project Q1 Losses for HPCL
Several leading brokerages have revised their forecasts for HPCL, anticipating a challenging June quarter. Nomura India, a foreign brokerage, projects sharp losses in the fuel and LPG marketing segments. It estimates a blended loss of approximately Rs 27 per litre on petrol and diesel, coupled with an under-recovery of Rs 680 per cylinder for LPG. Citing these concerns, Nomura has downgraded HPCL's stock to 'Neutral' with a revised target price of Rs 440.
Nuvama also echoed these sentiments, foreseeing a loss in Q1 FY27 due to weak marketing margins amid high crude prices. The brokerage maintained its 'Reduce' rating on HPCL, setting a target of Rs 372, indicating an unfavorable risk-reward scenario for investors.
Q4 FY26 Beat vs. Current Headwinds
HPCL's March quarter (Q4 FY26) results had surprised analysts, with Equirus Securities noting a "strong beat" against expectations. This performance was attributed to robust marketing activities and strong refining profitability, despite a difficult macroeconomic environment marked by higher crude prices and rupee depreciation. However, the ongoing West Asia conflict has introduced further volatility, weakening the near-term outlook for the OMC.
The company's management has assured stakeholders of adequate crude availability, with supplies secured until mid-July. Yet, analysts point to the sharp rise in crude prices, subdued product prices, persistent market volatility, and currency depreciation as key factors expected to erode profitability in Q1 FY27.
Analyst Ratings and Future Prospects
Despite the immediate challenges, not all brokerages share the same bearish view. Emkay Global, while largely retaining its FY27-28E EBITDA estimates, maintained an 'ADD' rating with an unchanged target of Rs 410. They anticipate incremental benefits from the Vizag residue upgradation facility (RUF) starting from Q2 FY27, and the Barmer refinery (HRRL) is slated for full commissioning by mid-May 2026, potentially improving future performance.
Similarly, MOFSL reiterated a 'BUY' rating on HPCL, setting a target price of Rs 455 based on a Sum-of-the-Parts (SoTP) valuation. MOFSL estimates HPCL to deliver a return on equity (RoE) of 16.2 per cent in FY28 and a 5.4 per cent FY28 dividend yield, without factoring in significant benefits from upcoming projects like the bottom-upgradation unit and Project Samriddhi.
Investors are advised to consult with qualified financial advisors before making any investment decisions, as market conditions remain dynamic.