BPCL vs HPCL: Today every swipe we make we receive updates on the next big things and industries of the future. These include Ev’s, data centers, solar energy, etc.
But are traditional investments like refining still viable? Here we compare BPCL vs HPCL across various metrics. Keep Reading to find out!
Table of Contents
Industry Overview – Oil and Gas Industry
Despite being an open fact that the industry will one day be phased out the reliance already makes it an ardent task for the next decade. Instead, the oil demand in India is expected to double to reach 11 million barrels by 2045.
Currently, diesel and gasoline the most used oils are expected to cover 58% of India’s total oil demand. Natural gas in India is expected to have an average annual growth of 9% until 2024.
Business Overview – BPCL vs HPCL
BPCL
| Face value (₹): 10 | Net profit margin:5.8 |
| Market cap (Cr.): ₹ 77,757 | Current ratio: 0.91 |
| Promoter’s Holdings (%) 56.03 | Debt to equity:1.16 |
| Stock P/E: 4.05 | ROE (%) 39.55 |
| EPS (₹): 88 | Dividend yield (%) 22.04 |
Bharat Petroleum Corporation Ltd. is a state-run oil refinery that has its roots back in the colonial period of 1891. The company is currently under the ownership of the Ministry of Petroleum and Natural Gas.
It is India’s 2nd largest downstream state oil corporation. The company is a Maharatna Public Sector undertaking. Today the company’s businesses include Bharatgas, MAKLubricants, Fuels and Services, Aviation, refinery, etc.
HPCL
| Face value (₹): 10 | Net profit margin:3.6 |
| Market cap (Cr.): ₹ 37989 | Current ratio: 0.7 |
| Promoter’s Holdings (%) 54.9 | Debt to equity:1.15 |
| Stock P/E: 4.56 | ROE (%) 32.74 |
| EPS (₹): 59 | Dividend yield (%) 9.7 |
This state-run entity finds its roots back in 1910. Today the company is a subsidiary of ONGC which is also under the ownership of the Ministry of Petroleum and natural gas.
The company currently holds a 25% market share amongst Indian public sector undertakings. A lesser-known fact, HPCL was the first PSE to be listed on the BSE.
Their businesses include refining, retail, lubricants, aviation, etc.
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Financial Metrics – BPCL vs HPCL
Revenue
In FY21, HPCL earned a revenue of Rs 1,11,531 Cr whereas BPCL was able to earn Rs 230,162 Cr. However considering the huge difference in the sizes of the company, comparing their annual revenues would not offer a clear picture.
Here let us take a look at the potential offered by the two companies through their ability to increase revenues over the last few years.
Here both the company’s revenues have suffered in 2020 which is a trend noticeable in most companies.
Profitability
When it comes to profits HPCL set a milestone in 2021 after earning the highest ever PAT of Rs. 10,664 cr. This was a 3-time increase over that of 2020. BPCL’s profits have increased from Rs. 2265 cr in 2020 to Rs. 17645 cr in 2021.
This gives BPCL a 3-year negative CAGR of 44.06%. The company’s net profit margin for 2021 stood at 7.66% in 2021.
HPCL however has a lower margin of 4.514% as of 2021. As of 2021, the company’s 3-year CAGR stood at 33.60%.
Returns and Valuation
As of 2021, HPCL has provided a ROCE and ROE of 28% and 20.92% respectively. BPCL has provided similar returns of a ROCE and ROE of 30.18% and 18.46%.
BPCL has a PE of 4.05 whereas shares of HPCL trade at a PE of 4.55. Both the companies trade at a low valuation below the Industry average PE of 13.7.
In Closing
In this article, we compared two very similar companies HPCL vs BPCL on various metrics. While investing in the industry despite many forecasts in its favor, investors must make note of the disruptive nature of electricity and other green energy.
The major determining factor here will be the speed of acceptance of these alternatives across India. That’s all for this post, let us know which company you would pick in the comments below. Happy Investing!
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Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
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