Shares of Hindustan Petroleum Corporation Limited (HPCL) have fallen around 6% over the past three months, underperforming the benchmark Nifty index, which declined 2% in the same period. The drop reflects investor concerns over potential LPG-related losses in the March quarter and the risk of higher excise duties on petrol and diesel. These pressures have, however, been partially offset by strengthening refining margins.
Despite the recent share price weakness, analysts remain positive on HPCL’s medium-term outlook. A softer global crude oil price environment, easing capital expenditure intensity and the commissioning of the Rajasthan refinery are expected to support earnings visibility. The December quarter (Q3FY26) delivered another resilient performance, even as operations at the Mumbai refinery faced disruptions. Structural improvements from refinery upgrades, operational efficiency measures and balance-sheet strengthening are beginning to show through.
Global trends also appear favourable. The US Energy Information Administration expects oil demand growth to slow to about 0.86 million barrels per day in calendar year 2026, while global supply continues to rise. This imbalance is generally supportive of downstream marketing margins for oil marketing companies such as HPCL.
During the quarter, earnings were driven by strong gross refining margins (GRMs) and sharply lower LPG losses. Net profit rose 35% year-on-year to ₹40.7 billion, though it came in below estimates due to GRMs being slightly weaker than expected. LPG under-recoveries narrowed significantly, aided by government compensation, while marketing volumes grew 4% year-on-year.
That said, retail fuel margins moderated compared with last year, reflecting softer petrol and diesel spreads. GRMs were also impacted by inventory losses and temporary operational issues linked to crude processing.
Looking ahead, earnings estimates have been modestly trimmed to reflect the impact of a weaker rupee on retail margins, partially offset by stronger refining economics. The target price has been rolled forward to FY28 but retained at ₹627, implying a potential upside of about 46% from current levels.
The investment view remains unchanged, underpinned by expectations of stable fuel pricing policy and continued support from favourable crude oil dynamics.
