Feb 15, 2012, 03.04 PM | Source: Moneycontrol.com

Hold BPCL; target of Rs 723: SPA Research

SPA Research has recommended hold rating on Bharat Petroleum Corporation (BPCL) with a target of Rs 723, in its February 14, 2012 research report.

SPA Research has recommended hold rating on Bharat Petroleum Corporation (BPCL) with a target of Rs 723, in its February 14, 2012 research report.

BPCL's revenue increased significantly by 39% QoQ and 60% YoY to INR 588 bn. The company reported net profit of INR 31 bn vs INR 2 bn in Q3FY11 and net loss of INR 32 bn in the last quarter. The robust performance is mainly attributed to higher sales volume (14% QoQ, 9% YoY), higher GRM (up 117% QoQ) coupled with higher compensation received from upstream and the Govt., which lead to over recovery of INR 29bn.

BPCL achieved crude throughput of 6.13 mmt in Q3FY12 which is up by 10% on QoQ basis and 22% on YoY basis. The sales volume increased by 14% QoQ and 9% YoY to 8.04 mmt due to higher sales of MS, HSD, ATF and LPG. BPCL's average GRM for Q3FY12 improved to USD 3.48/bbl vs USD 1.6/bbl in Q2FY12 and USD 4.62/bbl in the corresponding quarter last year. The company reported forex loss of INR 12bn during the quarter due to higher crude prices and rupee depreciation. BPCL incurred INR 223 bn loss on sale of diesel, kerosene and LPG during 9MFY12 (up by 114% as compared to 9MFY11) of which upstream and the Govt. shared 38% and 46% of total under recoveries till date. In 1HFY12, BPCL accounted only 33% and 23% of total subsidy received from upstream and Govt respectively. Hence in lieu of the previous quarter's adjustment, BPCL reported net over recovery of INR 29 bn in Q3FY12.

BPCL's future outlook remains positive as the company is planning to expand its refining capacity by 75% to 42 mmt and is also diversifying its portfolio into exploration and petrochemicals in order to reduce its exposure to under recoveries. We are revising BPCL's EPS estimates from INR 49.0 to INR 28.2 for FY12E and from INR 53.1 to INR 51.1 for FY13E on the back of upward revision in our assumptions for crude oil price and exchange rate. We have increased our crude oil price assumption from USD 98/bbl to USD 110/bbl for FY12E and from USD 95/bbl to USD 100/bbl for FY13E. Our revised estimates are based on exchange rate assumption of INR 48/USD and INR 47/ USD for FY12E and FY13E respectively. The company is currently trading at 11.5x FY13E EPS of INR 51.1 and 7.7x FY13E EV/EBIDTA. We are revising SOTP based fair value of BPCL to INR 723 (INR 751 earlier) and maintain our HOLD rating given regulatory overhangs, says SPA Research report.

Public holding more than 90% in Indian cos

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