MS-Hindustan Petroleum Management Call Takeaways ：Russia Crude,Hardware Upgrades...-20250808

HPCL hosted an earnings call and discussed project timelines, capital allocation andthe path ahead, especially on crude sourcing and cost savings. Balance sheet de-gearing and project execution were in focus. Peak capex has passed and most projecttimelines remain largely unchanged. Multiple small investments in gas infrastructureare delivering cashflows. More on F1Q26 results here:

Russian Crude: Russian crude was 13% of crude mix in 1Q26 vs 31% in F25. Decisionon utilisation of crude grade largely depends on value and discounts. Russian crudediscounts have been minimal and F1Q26 crude sourcing shift was made largely oncrude discounts in the market. There is no government direction on crude sourcingcurrently.

Projects Update: The new 240kbpd refinery is 95% completed and petrochemicalplant is 75% completed so far. HPCL will commence the commissioning process inthe next six months. The US$1.7bn Vizag refinery upgrade to increase diesel outputis starting and should raise integrated margin by US$2-2.5/bbl on our estimates, i.e~10% to earnings.

Cooking Gas recoveries from the government remain in the works and should helpreduce net debt - a key focus for management. At current rate, HPCL expects lossesto be ~Rs10bn in 2Q26.

Cost Reductions: Sees Rs 10-15bn in cost reductions i.e ~US$0.4-0.6/bbl addition tointegrated margins.

See our views on India Energy and why we are OW on HPCL - India Energy: ChinaAnti-Involution and Refining's Golden Age & India Energy: India's Oil Trade inPerspective