Bharat Petroleum Corp Ltd (BPCL) is likely to turn around into black in the September quarter from deep into red last year, driven by reduced retail losses, inventory gains, and strong gross refining margins.
Analysts expect a 34 percent on-quarter decline in net profit to Rs 6,580 crore. Net sales of the company are likely to fall 10 percent on a year-on-year basis and 8 percent quarter-on-quarter to Rs 1.03 lakh crore in the reporting quarter, according to a poll of 10 analysts by Moneycontrol.
Analysts forecast a 640 percent surge in EBITDA for BPCL. This growth is due to strong middle distillate spreads and inventory gains from crude oil price fluctuations. Analysts also anticipate a decrease in retail losses, helping mitigate the marketing EBITDA loss, which should offset the year-on-year decline in GRMs resulting from the correction in fuel spreads after Russia sanctions in the second quarter of FY23, alongside positive inventory gains. They project BPCL's refining margin to reach $19 per barrel, while retail losses for MS/HSD will drop to Rs 2.5 per liter from Rs 10 per liter a year ago.
According to a Sharekhan note, BPCL is expected to report significant quarterly earnings decline in Q2FY24 due to concerns about auto fuel under-recoveries, even though retail auto fuel prices remain unchanged. However, the impact will be partly offset by robust refining margins and substantial inventory gains resulting from the sharp increase in Brent crude oil prices.
In 2QFY24, Brent crude oil reached $87 per barrel, marking an 11 percent increase on-quarter. This rise was driven by OPEC+ maintaining production cuts despite strong global consumption, leading to a 138 percent QoQ increase in Gross Refining Margins (GRMs) to $9.5 per barrel.
JM Financial expects BPCL to report a GRM of $16.2 per barrel for the quarter, which is an increase from $12.6 per barrel in 1QFY24. This is based on a core GRM of $13.2 per barrel and a crude inventory gain of $3.0 per barrel. The crude throughput is expected to be at 9 million metric tonnes, down 12.9 percent QoQ, and marketing sales volume at 12.4 million metric tonnes, down 5.4 percent QoQ. Auto fuel gross marketing margins are projected to decline to Rs 3.3 per liter in 2QFY24, compared to Rs 8.8 per liter in 1QFY24, although this decrease will be partially offset by a product inventory gain of $1.0 per barrel.
Important factors to monitor are marketing earnings, gross refining margins, inventory loss, changes in working capital/debt, and interest expenses.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
