OMCs rally, BPCL at record high; Analysts bet on GRM recovery

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

Moneycontrol Bureau Shares of Bharat Petroleum Corporation (BPCL) jumped 10.5 percent, touching record high at Rs 1023.65 intraday on Friday. Investors are cheering up the stock for March quarter results. Analysts are also bullish on the stock with increased target price.  Entire oil marketing companies (OMCs) pack is buzzing on buyers' radar today with IOC and HPCL rising 7 and 8 percent respectively.Meanwhile, Bank of America Merill Lynch has reiterated buy rating with a target price of Rs 1093 per share. Despite near-term headwinds on refining/marketing margins, the brokerage firm is positive on valuation support, prospects of margin recovery, potential reversal of inventory loss and volume growth at Kochi.  It feels that second quarter of FY17 is likely to provide a better backdrop for margins on seasonal weakness in crude price. Volume support could, however, falter on base effects and adverse price elasticity."Rising oil prices amidst local elections have forced OMCs to take a hit on their marketing margins. Diesel margins are tracking Rs 0.6-0.65 per litre and petrol margins at Rs 0.85 in Q1FY17 versus Rs 1.3/1.5 in Q4FY16 and versus our FY17 estimates of Rs 0.7/1.2," it says in a report.According to BoAML, BPCL’s ability to continually raise prices increases confidence in the sustainability of their marketing freedom. Cuts in govt. excise duties can absorb USD 33 per barrel in crude. “Cash flow concerns of the previous upcycle seem unlikely to re-emerge soon. BPCL has the best operational track record among OMCs and has demonstrated prudent capital redeployment policies,” it further adds.Morgan Stanley also has an overweight rating on the stock with a target price of Rs 1089 per share. It expects gross refining margins to recover. Morgan Stanley is positive on BPCL and HPCL. It says key surprise in BPCL's Q4 result was marketing, both on volumes and margins. Marketing volume increased 13 percent (YoY) and 6 percent (QoQ).The state-owned OMC reported 10.6 percent drop in its March quarter net profit on back of slump in oil prices. Net profit in January-March quarter fell to Rs 2,549.08 crore from Rs 2,852.89 crore in the same period a year ago. Sales were down to Rs 44,197.09 crore in the fourth quarter of 2015-16 fiscal from Rs 51,346.12 crore, a year-ago. It earned USD 6.59 on turning every barrel of crude oil into fuel in 2015-16 as opposed to a gross refining margin of USD 3.62 a barrel in the previous fiscal.CLSA retains buy rating on BPCL stating that every USD 1/bbl on GRM/3 percent higher diesel volumes will add Rs 15/3 to FY17 earnings per share. It says that limited upside in the crude price, an election-free calendar for the rest of 2016 and a possible buffer in the government’s excise should ensure continuation of healthy marketing margins.

It expects GRMs to recover as 2016 global oil demand growth stays above 1mbpd in the current low crude price environment, which should prevent any decline in refinery utilisation rates. "BPCL’s upcoming Kochi upgrade will drive a structural uplift in its GRMs as it benefits from higher complexity. Low process loss in a weak crude price environment and rising light heavy crude differentials in an oversupplied crude market should ensure higher complexity premiums," CLSA says in a report. At 10:50 hrs Bharat Petroleum Corporation was quoting at Rs 1,010.70, up Rs 84.30, or 9.10 percent on the BSE.Follow @NasrinzStory