Chennai Petroleum Corporation Limited (NSE: CHENNPETRO) saw its shares decline over 5% as investors reacted to its recent earnings report, which highlighted concerns around cash flow.
Key Highlights
- Stock Performance: Over the past year, Chennai Petroleum’s share price increased from ₹582.6 to ₹660.2, representing a 13.3% gain, while the BSE OIL & GAS index rose by 50.4%.
- Industry Comparison: The BSE OIL & GAS index fell 0.6% today, with HPCL and BPCL down 1.3% and 0.9%, respectively. However, Indraprastha Gas and Adani Total Gas were among the few gainers, up 0.8% and 0.1%.
Cash Flow Concerns
- Accrual Ratio: For the year ending September 2024, Chennai Petroleum recorded an accrual ratio of 0.20, indicating its free cash flow (FCF) fell short of covering its reported profit of ₹7.17 billion. The company burned through ₹18 billion in FCF over the past year, a stark contrast to the ₹48 billion positive FCF it generated the previous year.
- Investor Sentiment: The high accrual ratio and significant cash burn raise concerns about the sustainability of reported profits, prompting some shareholders to seek stronger cash conversion in the upcoming quarters.
