Buy Bharat Petroleum Corporation; target of Rs 495: Emkay Global Financial

Emkay Global Financial is bullish on Bharat Petroleum Corporation has recommended buy rating on the stock with a target price of Rs 495 in its research report dated March 02, 2021.

March 02, 2021 / 04:43 PM IST
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Emkay Global Financial's report on Bharat Petroleum Corporation

BPCL board has approved the sale of its 61.65% stake in Numaligarh Refinery to a consortium of Oil India and Engineers India, and the Assam govt. for Rs98.8bn. The sale is expected to close within a month post all approvals, including BPCL shareholders’. The deal implies a valuation of Rs160.2bn for NRL as a whole. With Rs30-40bn of average annual EBITDA and Rs12.8bn of net cash equivalent, the deal implies 5.5-7.9x PE and 3.6-4.7x EV/EBITDA − lower than the ballpark rate of 8-10x and 5-7x, respectively. It is also 6% lower than our valuation of Rs171bn for NRL. Though, it lowers BPCL’s FVTP by just ~Rs3/sh. It is sizably higher than what was quoted by media reports and Assam govt’s budgeted valuation of Rs100-130bn. Hence, we view the deal as neutral to positive.


The sale is an important milestone in BPCL’s disinvestment process, and cash proceeds may also be paid to BPCL shareholders as a special dividend of Rs40-50/sh in the next 1- 2 months. Retain Buy and OW on BPCL, with a TP of Rs495.

For all recommendations report, click here

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first published: Mar 2, 2021 04:43 pm

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