H P C L (HINDPETRO)

FairStock Score: 85/100 — HIGH CONVICTION

Score breakdown: P/E: 3/3 · ROCE: 0/2 · Growth: 2/2 · Dividend: 1/1

Key Financials

Strengths

• Trailing valuation appears cheap with P/E 6.06, P/B 1.57 and Graham Number ₹625.56 vs price ₹376.90.
• Recent profitability is strong: ROE 30.11%, profit growth 72.99%, and Piotroski F-score 8/9.
• Cash generation is meaningful: FCF ₹3,671 Cr and latest quarter net profit ₹4,011 Cr on ₹1.15 lakh Cr sales.
• Promoter holding of 54.90% provides ownership stability, with a 2.39% dividend yield while waiting.
• Altman Z-score 3.25 suggests current solvency and bankruptcy risk are low.

Concerns

• Business is cyclical and policy-sensitive; sales growth is negative at -2.48%, so profit may be at an earnings peak.
• EV/EBITDA of 211.89 is a red flag that trailing P/E understates the true economic cost of replacing/operating these assets and may not be normalized.
• Debt/equity of 1.11 means the balance sheet is not conservative enough for a commodity-price downturn.
• State promoter at 54.90% can bring regulatory pricing and subsidy risks that are not visible in a single quarter.

AI Analysis

At ₹376.90, Hindustan Petroleum looks cheap: P/E of 6.06, P/B of 1.57, Graham Number of ₹625.56, and a DCF estimate of ₹923.64. The FairStock score of 87/100 calls it high conviction. But my first question is always: how much of this year's earnings is true earning power? This is an oil refining and marketing business, a cyclical, policy-sensitive industry. Profit grew 72.99% and ROE is 30.11%, yet sales fell 2.48%. The EV/EBITDA ratio of 211.89 warns me that the market is not giving much value to current EBITDA, and that trailing net profit may contain inventory gains and other temporary effects. I cannot treat a peak as permanent. The company does have solid assets: book value ₹240.36, free cash flow ₹3,671 Cr, and latest quarterly net profit ₹4,011 Cr on ₹1.15 lakh Cr of sales. Piotroski F-score of 8/9 and Altman Z of 3.25 indicate financial health today, while debt/equity of 1.11 is manageable but not fortress-like. Promoter holding of 54.90% implies state support, but also the risk of government pricing/regulatory intervention. A 2.39% dividend yield provides some compensation. This is not a predictable Buffett-type stalwart; it is a cyclical, asset-backed play. The 29.86% margin of safety to Graham Number is useful only if the balance sheet can carry me through the downcycle. I would want lower debt, stable cash conversion, and evidence that high ROE can survive weaker refining margins before calling this high conviction.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer