Hindustan Petroleum Corporation Analysis

dividend

Pros

• Dividends per share have increased over the past 10 years.
• Dividends paid are well covered by earnings (2.5x coverage).
• Dividends after 3 years are expected to be well covered by earnings (2.9x coverage).
• Hindustan Petroleum's pays a higher dividend yield than the bottom 25% of dividend payers in India (0.76%).
• Hindustan Petroleum's dividend is above the markets top 25% of dividend payers in India (3.08%).

Cons

• Dividends per share have been volatile in the past 10 years (annual drop of over 20%).

future

Pros

• Hindustan Petroleum's earnings are expected to grow significantly at over 20% yearly.
• Hindustan Petroleum's earnings growth is expected to exceed the India market average.
• Hindustan Petroleum's earnings growth is expected to exceed the low risk savings rate of 7.2%.
• Performance (ROE) is expected to be above the current IN Oil and Gas industry average.

Cons

• Cash flow for Hindustan Petroleum is expected to increase but not above the 50% threshold in 2 years time.
• Hindustan Petroleum's earnings are expected to decrease over the next year.
• Hindustan Petroleum's net income is expected to decrease over the next 2 years.
• Hindustan Petroleum is not expected to efficiently use shareholders’ funds in the future (Return on Equity less than 20%).
• A decline in Hindustan Petroleum's performance (ROE) is expected over the next 3 years.
• Hindustan Petroleum's revenue is expected to decrease over the next 2 years.
• Hindustan Petroleum's revenue is expected to decrease over the next 1-3 years, this is not considered high growth.
• Hindustan Petroleum's revenues are expected to decrease over the next 1-3 years, this is below the India market average.

health

Pros

• Hindustan Petroleum is profitable, therefore cash runway is not a concern.
• Hindustan Petroleum is profitable, therefore cash runway is not a concern.
• Debt is well covered by operating cash flow (29.5%, greater than 20% of total debt).
• Debt is covered by short term assets, assets are 1.4x debt.
• Hindustan Petroleum's cash and other short term assets cover its long term commitments.
• The level of debt compared to net worth has been reduced over the past 5 years (282.4% vs 93.9% today).
• Interest payments on debt are well covered by earnings (EBIT is 141.7x coverage).

Cons

• Hindustan Petroleum's short term (1 year) commitments are greater than its holdings of cash and other short term assets.
• Hindustan Petroleum's level of debt (93.9%) compared to net worth is high (greater than 40%).
• High level of physical assets or inventory.

management

Pros

• Mukesh's remuneration is lower than average for companies of similar size in India.

Cons

• The average tenure for the Hindustan Petroleum board of directors is less than 3 years, this suggests a new board.
• Mukesh's compensation has increased by more than 20% in the past year whilst earnings fell less than 20%.
• The average tenure for the Hindustan Petroleum management team is less than 2 years, this suggests a new team.

past

Pros

• Hindustan Petroleum's year on year earnings growth rate has been positive over the past 5 years.
• Hindustan Petroleum used its assets more efficiently than the IN Oil and Gas industry average last year based on Return on Assets.

Cons

• Hindustan Petroleum's 1-year earnings growth is negative, it can't be compared to the 5-year average.
• Hindustan Petroleum's use of capital deteriorated last year versus 3 years ago (Return on Capital Employed).
• Hindustan Petroleum has not efficiently used shareholders’ funds last year (Return on Equity less than 20%).
• Hindustan Petroleum's 1-year earnings growth is negative, it can't be compared to the IN Oil and Gas industry average.

value

Pros

• Hindustan Petroleum is good value based on expected growth next year.
• Hindustan Petroleum is good value based on earnings compared to the IN Oil and Gas industry average.
• Hindustan Petroleum is good value based on earnings compared to the India market.
• BSE:500104 is up 11.1% along with the Oil and Gas industry (10.5%) over the past month.
• BSE:500104 is up 11.1% outperforming the market in India which returned 8% over the past month.

Cons

• Hindustan Petroleum's share price is above the future cash flow value, it's not available at a moderate discount (< 20%).
• Hindustan Petroleum's share price is above the future cash flow value, it's not available at a substantial discount (< 40%).
• Hindustan Petroleum is overvalued based on assets compared to the IN Oil and Gas industry average.
• 500104 underperformed the Oil and Gas industry which returned -4% over the past year.
• 500104 underperformed the Market in India which returned -14.5% over the past year.