Shaky Earnings May Not Tell The Whole Story For Hindustan Oil Exploration (NSE:HINDOILEXP)

The recent earnings release from Hindustan Oil Exploration Company Limited (NSE:HINDOILEXP ) was disappointing to investors. We looked deeper and believe that there is even more to be worried about, beyond the soft profit numbers.

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How Do Unusual Items Influence Profit?

Importantly, our data indicates that Hindustan Oil Exploration's profit received a boost of ₹339m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. We can see that Hindustan Oil Exploration's positive unusual items were quite significant relative to its profit in the year to September 2025. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Hindustan Oil Exploration.

An Unusual Tax Situation

Having already discussed the impact of the unusual items, we should also note that Hindustan Oil Exploration received a tax benefit of ₹44m. This is of course a bit out of the ordinary, given it is more common for companies to be paying tax than receiving tax benefits! Of course, prima facie it's great to receive a tax benefit. However, our data indicates that tax benefits can temporarily boost statutory profit in the year it is booked, but subsequently profit may fall back. Assuming the tax benefit is not repeated every year, we could see its profitability drop noticeably, all else being equal.

Our Take On Hindustan Oil Exploration's Profit Performance

In its last report Hindustan Oil Exploration received a tax benefit which might make its profit look better than it really is on a underlying level. And on top of that, it also saw an unusual item boost its profit, suggesting that next year might see a lower profit number, if these events are not repeated. Considering all this we'd argue Hindustan Oil Exploration's profits probably give an overly generous impression of its sustainable level of profitability. If you want to do dive deeper into Hindustan Oil Exploration, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Hindustan Oil Exploration has 1 warning sign and it would be unwise to ignore this.

Our examination of Hindustan Oil Exploration has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.