HPCL shares gain for the ninth day in a row to the highest level since July — Here's what's working for the refiner

Shares of downstream oil refiner Hindustan Petroleum Corporation Ltd. (HPCL) are up another 6.5% on Wednesday after ending Tuesday's session with gains of over 6%. This is the stock's best day of 2023 so far.

The stock is now up for the ninth day in a row, which is its longest gaining streak since May this year, during which it had gained for 11 trading sessions at a stretch. This nine-day gaining streak has resulted in gains of 22% for the stock.

HPCL reported its September quarter results recently in which the company's operating margin stood at 8.6%, which was well above the 5.2% projection. The operating profit or EBITDA was also higher than the expectation of ₹6,329 crore, coming in at ₹8,217 crore.

Gross refining margin for the quarter stood at $13.3 per barrel, which was higher by $5.9 compared to the June quarter and $4.9 from last year.

The company is also expanding its refinery capacity by 7 MTPA at Vizag and 9 MTPA to commission the Barmer refinery. The refinery in Mumbai has already expanded its capacity to 9.5 MTPA from 7.5 MTPA. HPCL also commissioned a 5 MT regasification and storage terminal at Chhara.

HPCL also plans on investing ₹75,000 crore over the next five years, of which 25-30% will be spent for the renewables business, 20-25% on refining and the balance on marketing.

The company is also awaiting necessary approvals to carve out its lubes business as a separate entity and is also working towards either listing it or bringing in a strategic partner.

A wholly-owned subsidiary for all green business has also been formed by the company where they will foray into renewables, EV and hydrogen segments.

Brokerages are also optimistic on HPCL's prospects post its earnings and the management commentary. ICICI Securities has upgraded its financial year 2024 and 2025 Earnings per Share (EPS) estimates by 122% and 17% respectively.

HPCL's results were driven by marketing margin, while refining margin was in-line, according to Nomura. It remains Neutral on the stock with a price target of ₹305. However, it has upgraded its financial year 2025 EBITDA projections by 3% and those for financial year 2026 by 8% to factor in higher refining margin.

Out of the 32 brokerages that track HPCL, 18 of them have a "buy" recommendation, eight say "hold," while six of them have a "sell" rating.

Shares of HPCL are trading 6.5% higher at ₹296.65. The stock is trading at the highest level since July this year.

On the charts, the stock's Relative Strength Index (RSI) is now at 77, indicating that the stock is in "overbought" territory. An RSI reading above 70 indicates that the stock is "overbought" on the charts.