One of the much-awaited bonus issues is of a leading oil marketing company with a Maharatna PSU status. It is none other than Hindustan Petroleum Corporation (HPCL). This OMC has announced a bonus issue of 1:2 and its record date is nearing in less than 10 days. Ahead of the bonus shares, HPCL stock is trading below Rs 530 on June 13, and there is potential for further upside. Motilal Oswal is bullish on HPCL and recommended BUY.
HPCL Share Price:
The PSU stock traded at Rs 529.15 apiece, up by 0.6% on BSE with a market cap of Rs 75,062.49 crore. The stock was nearing its 52-week high of Rs 594.70 apiece and has more than doubled from its 52-week low of Rs 239.25 apiece.
YTD, the stock is up by 32% on BSE. In a year, the stock rallied by 93%.
HPCL Bonus Issue:
The OMC has announced a 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.
The upcoming bonus shares will be the third issue by HPCL in less than a decade. Before this, HPCL rewarded investors 1:2 bonus shares in July 2017, and another 2:1 bonus issue in September 2016.
BUY HPCL Stock Price:
In its latest research report, Motilal Oswal highlighted that IEA lowered its global oil demand estimate for CY24 by 100kb/d to 960kb/d. It also lowered demand projection for CY25 to 1mb/d (vs 1.2mb/d previously). The persistent weakness in oil demand, as per IEA, is driven by low demand in the key oil markets such as OECD countries, dull economic growth, an expanding EV fleet and an increase in vehicle efficiency.
Further, Motilal noted that as per IEA, CY25 oil demand growth is estimated at 1mb/d, while global oil supply growth is estimated at 1.8mb/d.
With OPEC+ looking to unwind spare production capacity, Motilal's note added, "We see some risk to net realizations of USD73-74/bbl for upstream companies in CY25. We think that the best way to play in a range-bound oil price environment with rising downside risks is oil marketing companies, where HPCL is our preferred pick."
On HPCL, the brokerage added, " HPCL remains our preferred pick among the three OMCs. We see the following as key catalysts for the stock: 1) the demerger and potential listing of the lubricant business, 2) the commissioning of its bottom upgrade unit, and 3) the start of the Rajasthan refinery in 4QFY25. We reiterate our BUY rating on the stock, valuing it at 1.4x FY26E P/BV to arrive at our TP of INR600."
From the current market price, this hints at a potential 14% upside in HPCL shares ahead.
Hindustan Petroleum Corporation Limited (HPCL) is a Maharatna CPSE Company and has a strong presence in the Refining & Marketing of Petroleum Products in the country. HPCL owns and operates Refineries at Mumbai & Visakhapatnam with design capacities of 9.5 MMTPA & 8.3 MMTPA respectively. HP Green R&D Centre at Bengaluru is a state-of-the-art research facility for driving innovation in HPCL.
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns. in advises users to consult with certified experts before making any investment decision.
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