Buy BPCL; target of Rs 480: Emkay Global Financial

Emkay Global Financial is bullish on BPCL has recommended buy rating on the stock with a target price of Rs 480 in its research report dated August 14, 2020.

Broker Research

August 18, 2020 / 12:46 IST

Emkay Global Financial's report on BPCL

BPCL reported Q1FY21 standalone EBITDA/PAT of Rs39.7bn/20.8bn, in line/10% lower than our estimates. PAT miss was due to higher-than-expected depreciation, interest and taxes. EBITDA was supported by a decline in opex which came in lower than estimates. Reported GRM was USD0.4/bbl in Q1 – a miss vs. our est. of USD2.5. Core GRM, however, came in at USD1.9/bbl, better than peers and our expectation, with Rs4.4bn of refining inventory loss. Refinery utilization was a slight miss at 75%, or 5.1mmt in volumes. Marketing inventory gain was Rs10bn, implying blended margin of Rs8.3/kg, up 37% qoq but a 9% miss. Domestic/total sales volume was down 32%/27% yoy (weaker than industry and peers at 26-28%). Core EPS of Rs9.2 (at 25% tax rate) was a ~50% beat.

Outlook

We maintain our estimates and TP of Rs480. Retain Buy rating and OW stance on BPCL in sector EAP. We remain positive on the OMC space, with HPCL being our top pick. Volume and GRM recovery remain the key triggers.

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