Neutral BPCL; target of Rs 310: Motilal Oswal

Neutral

Motilal Oswal's research report on BPCL

BPCL’s reported 3QFY25 financial performance was largely in line with our expectations, as weaker-than-expected refining performance was offset by robust marketing margins. We estimate up to a USD1/bbl refining GRM impact should the Russian crude proportion decline to zero (not our base case). On a sequential basis, LPG prices have remained stable, and under-recoveries should start tapering off from 1QFY26 onwards. Further, marketing margins at ~INR9/INR5 per liter for MS/HSD remain robust and above our assumption (of INR3.3 per liter). BPCL is currently trading at 1.3x FY26E P/B, at par with the one-year fwd. mean -1sd. With FY26 RoE at ~13.4%, current valuations appear reasonable, and we see limited downside from the current levels. However, with marginal volume growth and a spike in capex in the coming years, we reiterate our Neutral rating on the stock with a TP of INR310, valuing BPCL at 1.5x Dec’26E P/B.

Outlook

With valuations at 1.3x FY26E P/B, at par with 1-yr fwd. mean -1sd, we see limited downside from the current level. However, with marginal volume growth, rising capex, and volatility in earnings from the marketing division, we reiterate our Neutral rating on the stock with a TP of INR310, valuing BPCL at 1.5x Dec’26E BV.

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