Bharat Petroleum Corp Ltd featured in Moneycontrol's analyst tracker as a contrarian downgrade, indicating a recent stock price increase despite a decline in analysts' optimism.
In the last month, the oil marketing firm's stock surged 22 percent. But 'buy' recommendations decreased from 25 to 22, while 'hold' and 'sell' calls rose to 5 and 7 from 4 and 5, respectively. The overall sentiment towards the stock remains positive on the Street, characterised by a mood of 'cautious optimism'.
Bharat Petroleum's Q3 results fell below analyst estimates on lower gross refining margin (GRM) and weaker marketing margin. Despite a record H1, the Q3 profits declined. Its Q3 refining throughput rose 5 percent on-quarter to 9.9 mmt, with reported GRM at $13.4/bbl, surpassing estimates.
While Singapore GRM averages $6.5 per barrel, long-term sustainability is uncertain. Analysts project BPCL's GRM at $13.1/6/6/bbl for FY24/25/26. Mumbai/Bina/Kochi GRMs missed by 39.3 percent/25.7 percent/23.6 percent. The PAT beat is attributed to a 51 percent surge in other income/lower interest cost, despite a marketing inventory loss of Rs 369 crore, according to a Nirmal Bang report.
BPCL's implied marketing margin contracted from Rs 7 a litre in 2Q to Rs 4.2 in 3Q, impacted by lower diesel margins and inventory loss. Interest costs dropped significantly QoQ, but higher depreciation and lower other income offset the reduction. The completion of refinery upgrades in Mumbai and Kochi and plans for petrochemical and renewable energy projects at Bina have been announced.
According to JP Morgan, despite historical trading at a premium due to better ROE and asset quality management BPCL's valuation premium against IOCL and HPCL may remain limited due to IOCL's aggressive petrochemical expansions.
Analysts said retail margin upside is restricted by periodic pricing constraints influenced by political considerations, potentially offsetting analysts' forecasted oil price declines. Clarity on the rights issue timeline, pricing, size, and other details, targeted for completion in FY24, is eagerly awaited by analysts.
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