HPCL's net profit soars to ₹3,023 crore; should you invest?

Hindustan Petroleum Corporation Ltd (HPCL) has reported a significant five-fold jump in its net profit for the third quarter of FY25, reaching ₹3,023 crore, fueled by robust marketing margins and operational efficiencies. This marks a remarkable rise compared to ₹712.84 crore during the same period last year.

Revenue Performance

The state-owned oil marketing company (OMC) recorded a revenue of ₹1.10 lakh crore in October-December 2024, driven by steady fuel sales and improved operational performance. Although income from operations remained relatively stable at ₹1.18 lakh crore, the increase in profitability highlights the company's strong operational strategy.

Key Drivers of Profitability

HPCL's pre-tax earnings from its fuel retailing business surged to ₹4,566.07 crore in Q3FY25, compared to ₹981.02 crore in the previous year and ₹1,285.96 crore in the preceding quarter. Despite a decline in gross refining margins (GRMs) to $6.01 per barrel from $8.49 a year ago, operational efficiencies and robust sales volumes contributed to the profit surge.

The company's fuel sales reached 12.32 million tonnes during the quarter, an increase from 11.36 million tonnes in the same period last year. Additionally, crude oil processing rose to 6.47 million tonnes from 5.34 million tonnes, reflecting the company's enhanced refining capabilities.

Challenges and Subsidy Concerns

HPCL faced an under-recovery of ₹3,100 crore on the sale of domestic cooking gas (LPG) at government-controlled prices, with no subsidy provisions made for the fiscal year so far. For the first nine months of FY25, the company reported a total LPG under-recovery of ₹7,598.93 crore.

Year-to-Date Highlights

Between April and December 2024, HPCL achieved its highest-ever sales volume of 37.12 million tonnes, including exports, marking a 7.6% growth from 34.49 million tonnes during the same period last year. The company also recorded its highest-ever quarterly sales volume of 12.87 million tonnes, registering an 8.2% increase compared to 11.90 million tonnes in Q3FY24.

HPCL’s outstanding Q3 performance underscores its ability to adapt to market dynamics and drive profitability despite external challenges. The company's focus on operational efficiencies, combined with improved marketing margins, has positioned it for sustained growth in the competitive oil and gas sector.