Buy Chennai Petroleum Corporation; target of Rs 456: KR Choksey

KR Choksey is bullish on Chennai Petroleum Corporation has recommended buy rating on the stock with a target price of Rs 456 in its research report dated May 14, 2018.

Broker Research

May 21, 2018 / 17:30 IST

26 Aug, 2025 12:21

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KR Choksey's research report on Chennai Petroleum Corporation

Chennai Petro reported revenue of INR 97.9 bln (+43.4% YoY, +14% QoQ) because of higher crude prices. Crude throughput was up by 2.5% QoQ and 34.9% YoY to 2.813 MMT. Gross margins were impacted by 280 bps YoY and 480 bps QoQ to 8.4% owing to higher crude oil prices. Fall in the gross margins (-280 bps YoY and 480 bps QoQ) was largely negated by fall in the employee cost (-126 bps YoY) and other expenses (-137 bps YoY) resulting into stability into the operational performance to some extent on a YoY basis, however the same has been cut back to an extent on a QoQ basis leading to an EBITDA of INR 4.3 bln (+38.1% YoY, -48.2% QoQ). Foreign exchange losses for the quarter came in at INR 774 mln as against forex gains of INR 652 mln which dented the net profit growth to a mere 4.3% YoY. Gross Refining Margin for the quarter stood at $5.76/bbl with the average GRM for the year at $6.42/bbl. Throughput came in at 2.813 MMT as against 2.744 MMT in Q3FY18 and 2.086 MMT in Q4FY17. The Board has recommended a final dividend of 185% on the Paid-up share capital of face value INR 10/- i.e. INR 18.5 per share.

Outlook

We valued the company by assigning a P/E multiple of 6x on the FY19E EPS of INR 76.1 and arrived at a target price of INR 456 (potential upside – 53.5%). We maintain our BUY rating on the stock.

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