Buy Chennai Petroleum Corporation; target of Rs 296: KR Choksey
KR Choksey is bullish on Chennai Petroleum Corporation has recommended buy rating on the stock with a target price of Rs 296 in its research report dated January 30, 2019.
March 04, 2019 / 03:50 PM IST
KR Choksey's research report on Chennai Petroleum Corporation
Chennai Petro reported revenue of INR 98.7 bln (+14.9% YoY, -17.8% QoQ). Crude throughput was down by 21.6% QoQ and 16.9% YoY to 2.279 MMT. Gross Margins declined to -0.7% (-1,392 bps YoY, -727 bps QoQ) impacted significantly due to inventory losses of INR 4.87 bn on account of decrease in crude prices as against inventory gains of 3.91 bn in Q3FY18 and 2.63 bn in Q2FY19. GRM for the quarter stood at -$0.2/bbl as against $4.85/bbl in Q2FY19 and $8.58/bbl in Q3FY18. Fall in the gross margins was only marginally negated from lower operating expenses on a YoY basis (-66 bps YoY), however it increased on a QoQ basis (+59 bps) leading to an EBITDA of –INR 4.2 bn (-154.4% YoY, -197.2% QoQ). OPM fell by 1,326 bps YoY and 786 bps QoQ to -4.3%. Loss for the quarter came in at INR 3.67 bn, down 195.1% YoY and 1,459.5% QoQ further aggravated by lower other income (-86.7% YoY, -50.3% QoQ) and higher finance cost (+7.3% YoY, +3.5% QoQ). However, the quarter witnessed forex gains of INR 750 mn as against –INR 1.88 bn losses in Q2FY19. Loss margin stood at 3.7% (-822 bps YoY, -395 bps QoQ).
We valued the company by assigning a EV/EBITDA multiple of 6x on the FY20E EBITDA and arrive at a target price of INR 296 (potential upside – 22.3%) from our earlier estimate of INR 456 . We maintain our BUY rating on the stock.
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