Buy BPCL; target of Rs 1031: KRChoksey

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26 Aug, 2025 12:21

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KRChoksey's report on Bharat Petroleum Corporation (BPCL)"BPCL has 4 refineries based in Mumbai, Kochi, Bina and Numaligarh. The company is raising its refining capacity from the current 26.3 MMtpa (12+9.5+3+1.8) in FY15-16 to 33.8 MMtpa (12+15.5+4.5+1.8) in FY16-17 and further to 39.5 MMtpa (14+15.5+4.5+5.5) in FY17-18 (Bina and Numaligarh capacity adjusted for equity stake of 50.0% and 61.65%). BPCL has further forayed into petrochemical business and is setting up propylene based 500 Ktpa petrochemical plant in Kochi with a capex of INR 60 billion. The plant is expected to be operational by 2018."BPCL’s Kochi refinery is currently undergoing integrated refinery expansion project (IREP) with a capex of INR ~142.25 billion. It will raise its refining capacity from current 9.5 MMtpa to 15.5 MMtpa and will produce propylene as a feedstock for BPCL’s petrochemical complex. IREP will produce Naphtha, Motor Spirit (MS), Liquefied petroleum gas (LPG), Superior kerosene oil (SKO), High speed diesel (HSD), Air turbine fuel (ATF) and petcoke. All the auto fuels produced will be Euro 4 and 5 compliant grades. BPCL petrochemical complex will produce niche petrochemical products like acrylic acid, acrylates, super absorbent polymer (SAP) and oxo alcohol. BPCL is also planning to setup a petcoke based power plant of 500 MW which will supply electricity to the refinery. Currently it uses Naphtha for power generation.Valuation"We expect NIL under recoveries for FY16 and model refining margin for BPCL at $5.6/bbl in FY2016E and $5.0/bbl in FY2017E versus $3.6/bbl in FY2015. We expect crude throughput at 24 mn tons for FY16 and 24.6 mn tons for FY17 versus 23.4 mn tons in FY15. We expect marketing margin of Rs. 2/liter on gasoline for FY16/17 and marketing margins on diesel at Rs. 1.6/litre in FY16 and Rs 2/litre in FY17. We prefer BPCL as a play on improving domestic marketing environment (diesel deregulation), refining capacity expansion and stronger upstream portfolio. We recommend BUY with price objective of Rs 1,031/share based on a mix of SOTP, P/BV and P/E methodology. Stock trades at 9.68x FY17E EPS of INR 87.8 and 1.66x FY17E BV (adjusted for investments)", says KRChoksey research report.For all recommendations, click hereDisclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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