HPCL: OMC stock down 8% in 15 days; 31% upside ahead, says MOFSL
HPCL shares: MOFSL viewed HPCL’s valuation as reasonable and expected the stock to perform steadily, supported by several factors. It suggested a target price of Rs 590 on the stock.
- Dec 3, 2025,
- Updated Dec 3, 2025 7:46 AM IST
Shares of Hindustan Petroleum Corporation Ltd (HPCL) are reasonably valued following a period of volatility, MOFSL said the stock has corrected 8 per cent from its recent high over the last 15 days, as diesel gross marketing margins declined sharply.
MOFSL viewed HPCL’s valuation as reasonable and expected the stock to perform steadily, supported by several factors. It suggested a target price of Rs 590 on the stock, hinting at 31 per cent potential upside ahead.
According to MOFSL, diesel gross marketing margins contracted 18 per cent QoQ and 46 per cent YoY as diesel cracks surged to as high as $30 a barrel against their long-term average of $16 a barrel.
MOFSL stated that under an adverse scenario where diesel cracks over Brent remain near $30 a barrel, Brent averages $63 a barrel, and the ruee-dollar exchange rate stays around Rs 89.4 per dollar, diesel gross marketing margins could decline about 70 per cent versus Q2FY26 levels. However, MOFSL highlighted that diesel cracks had already begun correcting to roughly $22 a barrel, which should help ease pressure on the stock.
It noted that HPCL will receive Rs 660 crore per month in LPG compensation between November 2025 and October 2026, which will augment earnings. LPG under-recovery has declined to about Rs 30–40 per cylinder from roughly Rs 135 per cylinder in H1FY26, which should lift blended marketing margins.
MOFSL also expected a constructive medium-term auto-fuel marketing margin outlook, underpinned by its crude oil assumption of $60 a barrel in FY27 and FY28. Further, the start-up of RUF and HRRL, combined with sustained strength in diesel cracks, will support refining earnings.
MOFSL observed that refined-product markets remained tight. Elevated diesel and gasoil cracks reflected significant refinery disruptions, including post-summer maintenance, unplanned outages, an estimated 0.8 mbpd loss from refinery closures in CY25YTD in the Atlantic Basin, and repeated Ukrainian strikes that curtailed Russian exports and temporarily removed about 1.1 mbpd of Russian capacity.
With global refinery downtime peaking near 9.4 mbpd in October 2025 and Russia’s diesel export ban likely to continue through CY25, MOFSL expected near-term cracks to stay above long-term averages.
As maintenance cycles ease, new global capacity ramps up, and any progress in the Russia–Ukraine situation allows Russian product flows to normalise, diesel cracks are likely to moderate. Over FY27 and FY28, MOFSL maintained a balanced stance on refining since expected net capacity additions broadly match demand growth, though delays or fresh outages could keep margins supported.
MOFSL retained a positive stance on retail marketing, driven by its expectation of crude prices near $60 a barrel in FY27–28 and limited scope for sharp cuts in MS and HSD retail prices. Marketing volume is expected to grow at around 4 per cent CAGR. LPG under-recovery has already fallen to Rs 30–40 a cylinder in 3QFY26TD from over Rs 100 in recent quarters.
Shares of Hindustan Petroleum Corporation Ltd (HPCL) are reasonably valued following a period of volatility, MOFSL said the stock has corrected 8 per cent from its recent high over the last 15 days, as diesel gross marketing margins declined sharply.
MOFSL viewed HPCL’s valuation as reasonable and expected the stock to perform steadily, supported by several factors. It suggested a target price of Rs 590 on the stock, hinting at 31 per cent potential upside ahead.
According to MOFSL, diesel gross marketing margins contracted 18 per cent QoQ and 46 per cent YoY as diesel cracks surged to as high as $30 a barrel against their long-term average of $16 a barrel.
MOFSL stated that under an adverse scenario where diesel cracks over Brent remain near $30 a barrel, Brent averages $63 a barrel, and the ruee-dollar exchange rate stays around Rs 89.4 per dollar, diesel gross marketing margins could decline about 70 per cent versus Q2FY26 levels. However, MOFSL highlighted that diesel cracks had already begun correcting to roughly $22 a barrel, which should help ease pressure on the stock.
It noted that HPCL will receive Rs 660 crore per month in LPG compensation between November 2025 and October 2026, which will augment earnings. LPG under-recovery has declined to about Rs 30–40 per cylinder from roughly Rs 135 per cylinder in H1FY26, which should lift blended marketing margins.
MOFSL also expected a constructive medium-term auto-fuel marketing margin outlook, underpinned by its crude oil assumption of $60 a barrel in FY27 and FY28. Further, the start-up of RUF and HRRL, combined with sustained strength in diesel cracks, will support refining earnings.
MOFSL observed that refined-product markets remained tight. Elevated diesel and gasoil cracks reflected significant refinery disruptions, including post-summer maintenance, unplanned outages, an estimated 0.8 mbpd loss from refinery closures in CY25YTD in the Atlantic Basin, and repeated Ukrainian strikes that curtailed Russian exports and temporarily removed about 1.1 mbpd of Russian capacity.
With global refinery downtime peaking near 9.4 mbpd in October 2025 and Russia’s diesel export ban likely to continue through CY25, MOFSL expected near-term cracks to stay above long-term averages.
As maintenance cycles ease, new global capacity ramps up, and any progress in the Russia–Ukraine situation allows Russian product flows to normalise, diesel cracks are likely to moderate. Over FY27 and FY28, MOFSL maintained a balanced stance on refining since expected net capacity additions broadly match demand growth, though delays or fresh outages could keep margins supported.
MOFSL retained a positive stance on retail marketing, driven by its expectation of crude prices near $60 a barrel in FY27–28 and limited scope for sharp cuts in MS and HSD retail prices. Marketing volume is expected to grow at around 4 per cent CAGR. LPG under-recovery has already fallen to Rs 30–40 a cylinder in 3QFY26TD from over Rs 100 in recent quarters.