BPCL likely to be back in black with lower retail losses, strong margins in Q2

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.