Emkay Global Financial has given Buy recommendation for BPCL with a target price of Rs. 415 in its research report issued on May 26, 2022

Emkay Global Financial’s report on BPCL

BPCL reported Q4FY22 standalone EBITDA/PAT of Rs44.5bn/Rs21.3bn (up 4%, down 13% qoq). EBITDA/PAT beat our estimates by 38/43% due to a 12% GRM beat and 2x higher marketing inventory gains, partly offset by higher opex. Reported GRM came in higher at USD15.3/bbl (vs. USD13.6 est.). We believe core GRM could be ~USD10/bbl. Refinery volume was healthy at 8.12mmt or 118% utilization. Domestic sales volume growth of 6% yoy was the best among OMCs and the industry. Marketing inventory gain in Q4 was Rs31.8bn (vs. Rs15bn est), with BPCL’s blended margin at Rs0.65/kg (lower than Rs0.9/kg est). Implied net debt rose 25% yoy/26% qoq to ~Rs276bn (incl lease liabilities), with interest costs up 20% qoq to Rs5.3bn.


We cut our FY23E EPS by 19%, lowering marketing margins ahead, though partly offset by higher GRMs. We reduce our Mar’23E SOTP-based TP by 10% to Rs415, reducing the core business blended FY24E EV/EBITDA multiple from 5.6x to 5.4x. Maintain Buy.

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