Sharekhan's research report on Bharat Petroleum Corporation
Q4FY23 standalone adjusted PAT of Rs. 7,563 crore (up 3.9x q-o-q) was significantly above our estimate led by a sharp beat in GRM, higher-than-expected volumes, higher other income and lower interest cost/tax rate. Earnings were strong despite an inventory loss of Rs. 1,913 crore. BPCL posted a very strong GRM of $20.6/bbl (up 29% q-o-q), which was at premium of 4-5/bbl to GRM of IOCL/HPCL. Derived gross marketing margins (based on our backward calculations) also jumped by 136% q-o-q to Rs. 3450/tonne. Refining throughput/marketing sales volume grew strongly by 13%/2% q-o-q to 10.6 mmt/13.3 mmt. We expect BPCL’s earnings to normalise over FY24-25 led by normalisation of crude oil prices. However, a spike in crude oil prices (from $76/bbl currently) is a key risk to earnings recovery, especially given OMCs inability to hike petrol/diesel price given general election expected to be scheduled in May 2024.
Outlook
We maintain a Buy on BPCL with a revised PT of Rs. 430 given an attractive valuation of 8.5x/1.4x FY25E EPS/BV and FY24E dividend yield of 4-5%.
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