Hindustan Petroleum Corporation Limited reported strong financial results for Q3FY26, with consolidated net profit rising 58% year-on-year to ₹4,011 crore compared to ₹2,544 crore in the corresponding quarter of the previous financial year. The state-run oil marketing company also demonstrated solid sequential growth momentum.

Financial Performance Highlights

The company's revenue performance showed steady growth across different time periods. Sequential growth was particularly robust, with profit after tax increasing 4% from ₹3,859 crore in Q2FY26.

Refining Operations Excellence

The company's refining segment delivered exceptional performance with significant improvements in margins and throughput. Gross Refining Margin in Q3FY26 reached $8.85 per barrel, substantially higher than $6.01 per barrel recorded in Q3FY25. For the nine-month period of FY26, GRM stood at $6.91 per barrel, up from $4.73 per barrel in the corresponding period last year.

Both refineries achieved record-breaking crude throughput during the nine-month period. The refineries collectively processed 19.61 MMT of crude during 9MFY26, representing a 5.8% increase from 18.53 MMT in 9MFY25.

For Q3FY26 specifically, the refineries processed 6.38 MMT of crude, with Visakh Refinery contributing 4.01 MMT at 106% capacity utilization and Mumbai refinery processing 2.37 MMT at 99% capacity utilization. The company expanded its crude processing capabilities by introducing two new grades during Q3FY26, bringing the total number of new grades processed during 9MFY26 to seven.

Sales Volume and Market Performance

HPCL's sales performance reflected steady demand across key product categories. Q3FY26 sales including exports totaled 13.34 MMT, marking a 3.7% year-on-year increase. Domestic sales contributed with 3.1% growth during the quarter.

Network Expansion

The company continued expanding its retail infrastructure during the quarter. HPCL commissioned 321 new retail outlets in Q3FY26, bringing the total network to 24,572 outlets. The LPG distribution network also grew with five new distributors added during the quarter, taking the total count to 6,389 distributors across the country.

HPCL's Q3FY26 results demonstrate strong operational performance across refining, marketing, and network expansion activities, supported by improved refining margins and robust demand fundamentals in the domestic market.

State-run oil marketing companies (OMCs) faced selling pressure on January 20, 2026, with shares falling up to 3% following JPMorgan's downgrade of Hindustan Petroleum Corporation Ltd. (HPCL) to 'Neutral' rating. The brokerage cited valuation constraints and near-term earnings risks as key factors behind the rating cut, affecting investor sentiment across the sector.

JPMorgan's Rating Actions and Rationale

JPMorgan's downgrade of HPCL highlighted several concerns about the company's near-term prospects. The brokerage pointed to limited upside potential due to elevated balance sheet leverage and potential earnings headwinds linked to the commissioning of the new Rajasthan refinery. However, JPMorgan maintained its 'Overweight' stance on both Bharat Petroleum Corporation Ltd. (BPCL) and Indian Oil Corporation Ltd. (IOCL) within the sector.

Strong Historical Performance Faces Headwinds

The three major OMC stocks have delivered impressive returns over the past 12 months, rising between 23% and 30%, significantly outperforming the Nifty index which gained approximately 10% over the same period. This rally has been largely driven by strong earnings upgrades across the sector.

Excise Duty Uncertainty Creates FY27 Earnings Risk

JPMorgan identified excise duty policy as a critical factor for future earnings revisions. The brokerage noted that while some further upgrades to near-term earnings for FY26 remain possible, revisions to FY27 estimates will be crucial to sustain further upside. FY27 earnings for OMCs could face downside risk if fuel taxes are raised by ₹2.00 per litre, while estimates could move higher if such an increase does not materialise.

The brokerage highlighted that central government revenue collections have been tracking below budget, increasing the possibility of additional fund mobilisation through higher excise duties. A ₹2.00 per litre increase in excise duty on petrol and diesel could generate approximately ₹34,000.00 crore, or $3.80 billion, in additional revenue for the government.

Market Impact and Future Outlook

JPMorgan believes further upside in OMC stocks now depends on either a sharp and sustained decline in crude oil prices or clear visibility on excise duty policy. The brokerage estimates that a $1.00 per barrel change in average FY27 crude oil prices could impact OMC EBITDA by around 7.00%.

The brokerage noted that such excise duty increases need not necessarily be announced in the Union Budget on February 1, 2026, as fuel taxes were last raised on April 8, 2025. With clarity on taxes unlikely in the near term, the recent rally in OMC shares may pause until there is definitive confirmation regarding excise duty policy, potentially only becoming clear if taxes remain unchanged several months into FY27.