Brokerages have mixed views on Hindustan Petroleum Corporation (HPCL) after the company on Tuesday posted a 99 per cent drop in its net profit to Rs 27 crore for the March quarter.

The oil retailer had posted a net profit of Rs 2,970 crore in the corresponding period a year ago. Fall in refining margins and mounted inventory losses because of a sharp fall in international oil prices dragged the bottomline in Q4.

HDFC Securities retained ‘Add’ call on HPCL with a target price of Rs 230, citing an expected recovery in demand for petroleum products and subsequently, refining margins.

“In Q4, the EBITDA loss was lower than our estimates owing to better than estimated core gross refining margin ($9.3 per barrel against estimated $0.8),” the brokerage said.

Shares of HPCL traded 3.50 per cent higher at Rs 217.25 at around 11.10 am (IST), while the benchmark BSE Sensex was down 0.22 per cent at 33,531 at around the same time.

HPCL suffered an inventory loss of Rs 4,113 crore in the March quarter as compared with an inventory gain of Rs 1,224 crore in the corresponding period last year.

An inventory loss is booked when a company buys raw material (crude oil) at a particular price but by the time it is able to ship it to the refinery and process it, international rates have fallen. As refinery-gate prices are aligned to prevailing benchmark international rates, an inventory loss is booked. Inventory gain happens if the reverse happens.

Also, the company had a foreign exchange loss of Rs 975 crore as compared to a gain of 256 crore in January-March 2019.

On the other hand, Nomura maintained a ‘Neutral’ view on HPCL with a target price of Rs 185.

“HPCL reported a weak result. Though reported numbers were better than our expectation, HPCL’s result look much weaker than its peer BPCL,” the Japanese brokerage firm said, adding RIL is among the top picks in Indian oil and gas space.

“We value both refining and marketing businesses of HPCL at 5 times FY22F EV/EBITDA multiples. We value investments in listed entities at a 20 per cent discount to current market prices. We value stake in Bhatinda refinery (unlisted) at 2x FY22F book,” Nomura said in report.