Motilal Oswal has given Buy recommendation for BPCL recommended buy rating on the stock with a target price of Rs 605 in its research re with a target price of Rs. 605 in its research report issued on Oct 31, 2021

Motilal Oswal’s research report on BPCL

BPCL’s 2QFY22 results surpassed our estimates, driven by a better-than-expected margin performance – with both reported GRM (at USD6/bbl) and implied marketing margin (at INR6.1/lit) coming in higher than our estimates. Refining throughput (+5% QoQ) and marketing sales volume (+3% QoQ) were in line with our estimates – on the back of demand recovery post the second COVID wave. BPCL remains confident of achieving 100% utilisation of its refining nameplate capacity in FY22. Technical debottlenecking at the company’s PDPP plant in Kochi is underway and management expects the three units to contribute significantly from 4QFY22. Management expects the GRM to improve by USD1/bbl even if margins normalise from hereon.

Outlook

A further improvement in the company’s GRMs and marketing margin returning to normalised levels could create the potential for an upside to our call. On the other hand, any delay in the privatisation procedure owing to further lockdowns or delay in the opening up of international borders poses a downside risk to our call. BPCL trades at 1.7x FY23 PBV, and we value the stock at 2.3x Dec’23E P/BV to arrive at our target price of INR605. Reiterate Buy.

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