Prabhudas Lilladher's research report on BPCLBPCL reported Q3FY16 results in line with our estimates; EBITDA of Rs24.1bn (PLe: Rs23.1bn) and PAT of Rs14.9bn (PLe: Rs14.0bn). Firm refining and marketing margins (despite marketing inventory loss of Rs8.4bn), supported earnings. Continued refining strength (Q4 GRM of US$8/bbl) and healthy marketing margins augurs well for steady operating performance. BPCL’s refining margins recovered from Q2 lows; Q3 GRMs at US$7.7/bbl (Q2FY16 at US$3.9/bbl). Healthy margins are especially impressive, given 13% crude price correction in Q3. Singapore benchmark continues to remain healthy at ~US$8/bbl and stable crude prices provide upside risk to earnings, given potential zero inventory loss. BPCL’s earnings are expected to grow at 17% CAGR FY15‐18E. We remain positive on BPCL, given 1) firm refining margins 2) zero inventory loss, given stable crude oil prices and 3) healthy marketing profits. Maintain ‘BUY’.
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