Technical Trends Signal a Mildly Bullish Outlook
The primary catalyst for the upgrade stems from a positive shift in HPCL’s technical grade, which has moved from a sideways trend to mildly bullish. Key technical indicators present a nuanced but encouraging picture. On the weekly chart, the Moving Average Convergence Divergence (MACD) remains mildly bearish, yet the monthly MACD has turned bullish, suggesting longer-term momentum is gaining strength. The Relative Strength Index (RSI) on both weekly and monthly timeframes shows no clear signal, indicating the stock is not overbought or oversold, which supports stability.
Bollinger Bands reinforce this optimism, with both weekly and monthly readings signalling bullish momentum. Daily moving averages are also bullish, providing short-term confirmation of upward price movement. However, the Know Sure Thing (KST) indicator remains mildly bearish on weekly and monthly charts, and Dow Theory analysis shows no clear weekly trend and a mildly bearish monthly trend. On-Balance Volume (OBV) indicates no significant trend, suggesting volume is steady without major accumulation or distribution.
Overall, the technical landscape points to a cautiously optimistic outlook, with the stock price currently at ₹463.50, marginally up 0.09% from the previous close of ₹463.10. The 52-week range remains wide, from ₹287.55 to ₹508.45, indicating potential for further upside.
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Valuation Improves to Attractive from Very Attractive
HPCL’s valuation grade has shifted from very attractive to attractive, reflecting a recalibration of market multiples amid strong fundamentals. The company trades at a price-to-earnings (PE) ratio of 6.41, which is significantly lower than its peer Oil India’s PE of 13.34, indicating a relative discount. The price-to-book value stands at 1.73, while enterprise value to EBIT and EBITDA ratios are 7.61 and 5.79 respectively, underscoring reasonable pricing relative to earnings and cash flow.
Other valuation metrics include an enterprise value to capital employed ratio of 1.36 and an enterprise value to sales ratio of 0.36, both suggesting efficient capital utilisation and sales generation at a modest valuation. The PEG ratio is exceptionally low at 0.04, signalling that earnings growth is not fully priced in by the market. Dividend yield remains healthy at 3.34%, providing income alongside capital appreciation potential.
Return on capital employed (ROCE) is robust at 17.12%, while return on equity (ROE) stands at 24.49%, both reflecting strong profitability and efficient use of shareholder funds. These valuation and profitability metrics collectively justify the upgrade to an attractive valuation grade, supporting the Buy rating.
Financial Trends Demonstrate Strong Growth and Profitability
HPCL’s financial performance has been a key driver behind the rating upgrade. The company has reported positive results for four consecutive quarters, with net sales for Q3 FY25-26 reaching a record ₹1,15,153.20 crore. Net sales have grown at an annualised rate of 14.21%, while operating profit has expanded at an even faster pace of 22.69%, highlighting operational leverage and margin improvement.
Profit after tax (PAT) for the first nine months of FY25-26 surged by 260.86% to ₹11,981.63 crore, a remarkable increase that underscores the company’s improving bottom line. Over the past year, HPCL’s stock has generated a return of 35.33%, significantly outperforming the Sensex’s 7.97% return and the broader BSE500 index’s 9.00% return. Over longer horizons, the stock’s performance is even more impressive, with a 10-year return of 334.84% compared to the Sensex’s 249.97%.
These financial trends reflect sustained growth, improving profitability, and strong shareholder returns, all of which support the upgraded Buy rating.
Quality Assessment and Institutional Confidence
HPCL’s quality grade remains strong, supported by its consistent financial performance and market position within the oil exploration and refinery sector. The company benefits from a high institutional holding of 37.01%, indicating confidence from sophisticated investors who typically conduct rigorous fundamental analysis. This institutional backing provides stability and suggests that the stock is well-regarded among professional investors.
The company’s mojo score stands at 71.0, reflecting a Buy grade, up from the previous Hold rating. The market capitalisation grade remains at 2, consistent with its mid-cap status, and the stock’s technical and fundamental improvements have combined to justify the upgrade.
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Comparative Performance and Market Context
HPCL’s stock has demonstrated market-beating returns over multiple timeframes. In the past one month, the stock returned 3.15%, outperforming the Sensex’s 0.59%. Over one week, the stock’s 2.33% gain was slightly below the Sensex’s 2.94%, but this short-term divergence is overshadowed by longer-term outperformance.
Year-to-date, HPCL’s stock has declined by 7.11%, compared to the Sensex’s 1.36% fall, reflecting some near-term volatility. However, over one year, the stock’s 35.33% return far exceeds the Sensex’s 7.97%, and over three, five, and ten years, HPCL has delivered returns of 202.57%, 210.81%, and 334.84% respectively, compared to the Sensex’s 38.25%, 63.78%, and 249.97%. This long-term outperformance highlights the company’s resilience and growth potential within the oil sector.
HPCL’s current price of ₹463.50 remains below its 52-week high of ₹508.45, suggesting room for appreciation, while the 52-week low of ₹287.55 provides a wide trading range that has rewarded patient investors.
Outlook and Investment Implications
The upgrade to a Buy rating reflects a confluence of positive factors: improved technical indicators signalling a mild bullish trend, attractive valuation metrics relative to peers, strong financial performance with robust sales and profit growth, and high-quality institutional ownership. Investors should consider HPCL as a compelling opportunity within the oil sector, benefiting from both cyclical recovery and structural growth drivers.
While some technical indicators remain mixed, the overall trend is positive, and the company’s fundamentals provide a solid foundation for sustained performance. The stock’s discount to peer valuations and strong return on capital metrics further enhance its appeal for long-term investors seeking exposure to energy and refining.
Given these factors, the upgrade to Buy is well justified, signalling that Hindustan Petroleum Corporation Ltd. is poised for continued growth and market outperformance in the coming quarters.
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