Shares of Hindustan Petroleum Corporation Ltd (HPCL) have experienced a notable decline, dropping 9% over the past seven trading sessions. This downturn comes despite recent increases in petrol and diesel prices and the company reporting strong Q4FY26 results. On Friday, shares were trading around Rs 365.40, reflecting the market's apprehension.
The primary driver behind this slump is a consensus among several analysts forecasting substantial losses for the oil marketing company (OMC) in the upcoming June quarter (Q1FY27). Elevated crude oil prices combined with ballooning retail and LPG under-recoveries are expected to sharply impact near-term earnings. Elara Securities, for instance, downgraded HPCL from 'Buy' to 'Accumulate' and significantly cut its target price to Rs 444 from Rs 627, citing a 96% reduction in FY27E EPS estimates.
Analyst Perspectives on HPCL's Performance
Several brokerages have weighed in on HPCL's challenging outlook. Nomura India anticipates sharp losses in the fuel and LPG marketing segments, projecting blended losses of Rs 27 per litre for petrol and diesel, and Rs 680 per cylinder under-recovery for LPG. Consequently, Nomura downgraded the stock to 'Neutral' with a target price of Rs 440, emphasizing that OMCs face significant losses without meaningful fuel price hikes.
Nuvama also expressed caution, retaining a 'Reduce' rating with a target of Rs 372, citing an unfavorable risk-reward scenario and expected Q1FY27 losses due to weak marketing margins. However, not all analysts share this bearish view. MOFSL reiterated its 'BUY' rating on HPCL with a target of Rs 455, based on a Sum-of-the-Parts (SoTP) valuation. They project a return on equity (RoE) of 16.2% by FY28 and a 5.4% FY28 dividend yield, not factoring in benefits from new projects like a bottom-upgradation unit and Project Samriddhi.
Policy Support and Financial Buffers
Amid this challenging environment, analysts stress that policy support and a normalization of crude oil prices are crucial for HPCL's recovery. The company reported a negative buffer of Rs 1,27,99 crore pertaining to LPG subsidy as of Q4FY26. However, HPCL received Rs 1,980 crore during Q4FY26 as partial compensation for LPG under-recoveries, a move that could help cover a portion of its Rs 13,000 crore FY26 capital expenditure guidance, easing reliance on short-term borrowings and supporting deleveraging efforts.