HPCL Q2 FY25 Results: Net Profit Falls 98% Due to Lower Refining and Fuel Margins

Quick Insights

• Revenue: ₹99,925.91 crore, a 12% sequential decline.
• Net Profit: ₹142.67 crore, down by 98% YoY.
• EPS: Earnings per share sharply reduced in line with decreased profitability.
• Segment Performance: Crude throughput reached 6.3 MMT, operating at 107.7% capacity.
• Management's Take: "Quarterly performance affected by lower refining and marketing margins. Project developments are progressing, supporting long-term growth."

Management Commentary

HPCL faced a difficult Q2 FY25, with consolidated net profit plunging by 98% YoY to ₹142.67 crore, significantly down from ₹5,826.96 crore in the same quarter last year. Lower marketing and refining margins, due to reduced crude oil and product prices, heavily impacted profitability. Pre-tax earnings from downstream fuel retailing dropped significantly, falling to ₹1,285.96 crore from ₹6,984.60 crore in Q2 FY24. Management highlighted the influence of international price declines and increased domestic supply, noting that recent reductions in petrol and diesel prices prior to the general elections impacted earnings further.

Despite these setbacks, the company noted improvements in physical performance. HPCL's refinery throughput increased by 9.6% YoY to 6.3 MMT, reflecting a 107.7% utilization rate, thanks to operational enhancements. The company also expanded its crude basket by adding new grades like Jubilee and Pazflor.

Stock Market Reaction

Following the results, HPCL's stock reacted negatively. HPCL share price opened at ₹256.85, traded down by 3.1% to ₹249.40 as of 2:05 pm on October 25. The stock performance mirrored broader market trends, with Nifty and Sensex each showing declines amid sectoral pressures on energy stocks.

About HPCL & Recent Developments

HPCL, one of India’s leading oil marketing and refining companies, is navigating a challenging year marked by fluctuating global market conditions and local price reductions on key products. The company’s gross refining margin (GRM) for Q2 FY25 dropped to $3.12 per barrel, a sharp decline from $13.33 per barrel in Q2 FY24. However, HPCL’s strong operational performance has resulted in a record crude throughput and a rise in market share among public sector units. New initiatives include diversifying its crude sources and expanding sales channels domestically and internationally.

Project Updates and Future Outlook

HPCL invested ₹3,771 crore in Q2 FY25 to bolster its infrastructure, marking an investment total of ₹6,588 crore for the April-September period. Key projects, like the Barmer Refinery and the Visakh Residue Upgradation Facility, are progressing and expected to enhance HPCL’s capacity and product offerings. The Visakh Refinery project, one of the world’s largest hydrocracker units, is expected to begin operations in Q4 FY25. Additionally, HPCL expanded its retail presence by adding 353 new outlets, increasing its market footprint.

To Summarize

HPCL’s Q2 FY25 results reflect an operationally strong quarter, with 98% profit reduction due to a challenging margin environment. Despite financial setbacks, the company’s high throughput and project expansions position it for improved future performance.