BPCL may touch Rs 564: Antique Stock Broking

Amit Rustagi, Vice President-Energy Research at Antique Stock Broking told CNBC-TV18, "Bharat Petroleum Corporation (BPCL) is a different story. If you look at its E&P investments in Mozambique as well as Brazil, both the investments are panning out quite well and we have seen certain transactions done by even Indian companies in Mozambique where they have acquired stake at fairly large valuations. We have seen ONGC attributing almost 2.6 billion valuation for Anadarko’s 10 percent stake. Wherein BPCL also holds a 10 percent stake. So if you look at that math we can clearly get a Rs 160-180 per share value for Mozambique assets into BPCL valuations."

"Apart from that Brazil is still in early stages of exploration and development. So we are seeing good results coming out from Brazil where they are making new discoveries every two-three months. That can also pan out to be a similar valuation number for BPCL," he added.
He further said, "Now coming back to their regulated business in the domestic market, they are facing risk that if under recoveries goes up from here, whether in the election year government will be able to take a call on price hikes or not. But I think large risk for the company is getting over because at least we are in a directional decontrol environment for diesel which may be achieved over next 15-18 months if under recoveries remain between Rs 9-10 at the current level. So with a 50 percent hike in 18 months from here we will be able to see diesel decontrol. So that is something which these companies have been waiting for almost 9-10 years and in next one-two years we are going to see that getting achieved, so that is something which we are fairly bullish on."
"In between we have said it is coming from export parity pricing which has been discussed and a committee is taking decision on that. Apart from that the valuations are quite cheap and the stocks are not discounting the benefits of the E&P business, valuation of the E&P business as well as fair value of the domestic refining and marketing business. So we are bullish on BPCL with a target of Rs 564 which is at least 80-90 percent upside from here over a period of 12-18 months," Rustagi said.