BPCL starts outperforming
BPCL reported gross refining margins (GRMs) of $6.65/bbl in Q4 FY08 (vs $5.83/bbl in Q4 FY07 and $5.28/bbl in Q3 FY08), in line with the sharp increase in GRMs globally.
BPCL
Research: Macquarie
Rating: Outperform
CMP: Rs 247
Bharat Petroleum Corporation (BPCL) reported a recurring profit after tax (PAT) of Rs 58.4 crore in Q4 FY08, which was below the expected profit of Rs 120 crore. The difference was primarily on account of higher net interest burden due to the pending issuance of Rs 4,000-crore oil bonds by the government.
BPCL���s sales volumes grew 11% y-o-y to 7 million metric tonnes (mmt) in Q4 FY08, as a result of 8.5% y-o-y growth in domestic sales and 77% y-o-y growth in exports. The refinery throughput declined 5.1% y-o-y and 4.2% q-o-q to 5 mmt. This, coupled with the increase in petrol and diesel prices in February ���08, resulted in 35% y-o-y and 13% q-o-q growth in net sales.
BPCL reported gross refining margins (GRMs) of $6.65/bbl in Q4 FY08 (vs $5.83/bbl in Q4 FY07 and $5.28/bbl in Q3 FY08), in line with the sharp increase in GRMs globally. Petrol and diesel retail margins remained significantly negative during Q4 FY08 as the rise in global crude prices could not be passed through.
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In addition, BPCL received oil bonds worth Rs 3,970 crore (vs Rs 900 crore in Q4 FY07 and Rs 2,080 crore in Q3 FY08) from the government as compensation for under-recoveries. The initial ad-hoc announcement by the government for subsidy-sharing in FY09E suggests that oil marketing companies such as BPCL will be significantly disadvantaged.
The government���s primary intent is to keep BPCL���s earnings largely between Rs 1,000 crore and Rs 1,500 crore. Since early ���08, BPCL had started outperforming, given its defensive, deep value (0.6x PBV, 6.1x FY10E PER) nature.
Disclaimer: Investor's Guide does not accept responsibility for consequences of financial decisions taken by readers on the basis of information provided herein. The aim is to provide a reasonably accurate picture of financial and related opportunities based on information available with us.
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