According to a report by equity research firm ICICI Securities, Hindustan Petroleum Corporation (HPCL) is expected to see improved performance over the next 12-18 months. The worst in earnings seems to be over for the company. In the fourth quarter that ended in March 2023, HPCL reported a Profit After Tax (PAT) of Rs 32.2 billion, which is an increase of 80% year-on-year. The company achieved this through higher refining margins and lower 'other opex', with higher 'other income' boosting net earnings. ICICI Securities predicts that with record marketing margins for petrol and diesel, near-term marketing earnings are set to be significantly stronger. They believe that there will be a sharp increase in refining throughput, resulting in a stronger recovery in FY24E and FY25E. This increase is due to the commissioning of the 7 MTPA Vizag refinery and 9 MTPA Rajasthan refinery. In the fourth quarter, HPCL reported refinery throughput of 5 mt with over 100% utilisation. Gross Refinery Margins (GRMs) at $14/bbl jumped by $4.9/bbl QoQ and $1.6/bbl Y-o-Y and were the key drivers of the outperformance. Domestic marketing volumes at 10.9 mt were up 6.4% Y-o-Y, whereas export sales of 0.2 MT were down 54% Y-o-Y. ICICI Securities said, There has been a significant improvement in marketing margins in the past two months, with blended margins for petrol/diesel estimated at Rs 7.2/ltr in Q1FY24E (till 12th May’23). We expect marketing earnings to show a substantial growth over FY24E/FY25E. Furthermore, the report stated that HPCL is on track to increase its refinery capacity meaningfully by 7 MTPA for its standalone Vizag refineries and another 4-5 MTPA capacity will come via its 50% share in Rajasthan refinery (HMEL). The higher cashflows over FY24E will lower the net debt significantly. Also read: Torrent Power forms TU14 for power generation and trading Godrej & Boyce expands its portfolio, secures Rs 20 bn