1:2 Bonus, Rs 16.50/Sh Dividend; Maharatna PSU HPCL Recommeded To BUY; Yes Securities Sets Rs 700/TP

Maharatna oil marketing company, HPCL has announced double treats for investors. This leading PSU OMC is not only set to to deliver free bonus shares in the ratio of 1:2, but secondly, the company will reward the final dividend payout to the tune of Rs 16.50 per share for FY24. Following this, brokerage Yes Securities has recommended BUY on HPCL.

HPCL Share Price:

At the time of writing, HPCL shares rallied by 2.40% on Tuesday to Rs 517 apiece, which was near its intraday high of Rs 519.25 apiece on BSE. The company's market cap is at Rs 594.45 and Rs 239.25 apiece respectively.

HPCL Share Target Price:

In its research note, Yes Securities said, "Hindustan Petroleum's Q4FY24 performance showcases surprise weaker refining performance, GRMs drastically missing our estimates."

With EBITDA at Rs48bn and PAT at Rs28.4bn, marketing cushioned overall performance. Reported EBITDA and
PAT is lower than our estimates and consensus expectations. The reported GRM of USD6.95/bbl and Rs5.5/ltr of blended gross marketing margins, while the core integrated margins stood weaker at USD4.6/bbl, it added.

On the valuation, Yes Securities said, "HPCL has a Rs17.3bn/Rs17.2bn sensitivity to a change of Rs0.5/ltr and USD1/bbl, respectively. A dividend yield of 3.2%/3.6% FY25e/26e would be key for the shareholders, following the high dividend and bonus issue in FY24. The BV/share for FY25e/26e is at Rs 330/372 and the net debt: equity is highest amongst the OMCs for HPCL at 0.9/0.8x for FY25e/26e."

Furthermore, the brokerage added, "the stock trades at 7.6x/7.1x FY25e/26e EV/EBITDA and 1.5x/1.3x P/BV
(excl. investments, it trades at 6.1x/5.7x FY25e/26e EV/EBITDA and 1.0x/0.8x P/BV). We maintain a BUY rating and a target price of Rs700 valuing it on a sum-ofparts basis (core business at 6.9x EV/EBITDA and investments at Rs193). including Rs70/she from Lubes business."

HPCL Bonus Issue:

This leading OMC declared bonus issue in the ratio of 1:2. Meaning, HPCL will distribute 1 bonus share free of cost for every existing 2 shares held by investors. The record date is fixed on July 21, 2024.

The paid-up share capital is at Rs 1,418.55 crore on pre-bonus but will rise to Rs 2,127.82 crore on post-bonus. The premium required for implementing the bonus issue will be from the company's free reserves.

HPCL has a free reserve of Rs 709.27 crore. The company expects to credit or dispatch these bonus shares on or before August 7, 2024.

This will be the third bonus issue by HPCL in less than a decade. Earlier, HPCL rewarded investors 1:2 bonus shares in July 2017, and another 2:1 bonus issue in September 2016.

HPCL Dividend:

HPCL's board of directors recommended a final equity dividend of Rs 16.50 per equity share having a face value of Rs. 10/- each (pre-bonus), which translates into a final dividend of Rs. 11 per equity share having a face value of Rs. 10/- each (post-bonus) for the Financial Year 2023-24, subject to the approval of the shareholders of the Company.

The record date for the final dividend is fixed on August 9, 2024. HPCL said that the same will be paid within 30 days from the date of the declaration at the ensuing AGM.

Also, the final equity dividend is in addition to the Interim Dividend(s) of Rs 15.00 per share (pre-bonus) paid for the financial year 2023-24.

On a consolidated basis, in Q4FY24, HPCL registered a net profit of Rs 2,709.31 crore, declining by 25% from its profit of Rs 3,608.32 crore in Q4FY23. On the top-line front, consolidated total income stood at Rs 1.22 lakh crore during the quarter under review, dropping by 6%, as against Rs 1.15 lakh crore in Q4FY23.