Neutral BPCL; target of Rs 348: Motilal Oswal

Motilal Oswal's research report on BPCL

BPCL’s reported 3QFY23 GRM at USD15.9/bbl came in above our estimates while its implied marketing margin stood at INR1.1/lit (v/s -INR0.6/lit in 2QFY23). Refining throughput stood at 9.4mmt (v/s 8.8mmt in 2QFY23) while marketing sales volume, excluding exports, was at 12.8mmt (above our estimate; v/s 11.4mmt in 2QFY23). Singapore GRM remained steady and has been at USD10.2/bbl in Jan’23YTD; it touched a record high of USD21.7/bbl in 1QFY23. It stood at USD6.2/bbl in 3Q and USD7.1/bbl in 2QFY23. OMCs are estimated to be generating gross margins of INR11.2/INR2.3 on petrol/diesel in 4QFY23YTD, respectively. In the marketing segment, marketing sales volume came in at 12.8mmt (above estimate; +15% YoY). Management highlighted that the shutdown at IOCL’s Panipat refinery helped BPCL offtake higher volume in 3QFY23 with a few bulk customers also shifting to retail. However, factoring in the underperformance in 3QFY23, we cut our FY23E EBITDA/ EPS to INR66b/-INR1.8 from INR75b/INR3.2, respectively, (keeping our FY24 and FY25 estimates unchanged).

Outlook

There is no update on the divestment roadmap for BPCL now. The stock is trading at 1.2x FY24E P/BV, and we value it on 1.2x Dec’24E P/BV to arrive at our TP of INR348. Maintain Neutral.

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BPCL - 31 -01-2023 - moti