Buy BPCL; target of Rs 1109: KRChoksey

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26 Aug, 2025 12:21

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KRChoksey's report on BPCLBharat Petroleum Corporation Ltd (BPCL) posted a net profit of INR. 1,018 crs down 57.2% QoQ and 16.3% YoY. Net profit was down both QoQ and YoY due to lower refining margins, higher other operating expenses, inventory losses of INR 740 crs, forex loss of INR 240 crs. Net profits was partially offset by lower interest expense, lower depreciation, higher other income and lower raw material consumption. GRM’s for the quarter was $3.9/bbl, against $8.6/bbl in Q1FY16 and $1.5/bbl in Q2FY15. Refinery margins increased YoY and decreased QoQ basis. BPCL reported nil net under-recovery in Q2FY16 versus nil under recovery both QoQ and YoY.Valuation and viewWe expect NIL under recoveries for FY16 and model refining margin for BPCL at $5.0/bbl in FY2016E and $5.5/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 INR. 2/liter on gasoline for FY16-17 and marketing margins on diesel at INR. 1.6/litre in FY16 and INR 2/litre in FY17. We prefer BPCL as a play on improving domestic marketing environment (diesel deregulation) and stronger upstream portfolio. We recommend BUY with price objective of INR 1,109/share based on a mix of EV/EBITDA, P/BV and P/E methodology. Stock trades at 10.1x FY17E EPS of INR 89.3 and 1.7x  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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