Sharekhan has given Buy recommendation for Bharat Petroleum Corporation with a target price of Rs. 520 in its research report issued on Feb 09, 2021
Sharekhan’s research report on Bharat Petroleum Corporation
Q3FY21 was strong as operating profit/adjusted PAT at Rs. 4,306 crore/Rs. 3,058 crore, up 68%/133% y-o-y and beat of 22%/50% vs. street estimates led by strong performance in refining & marketing segment, higher other income and lower interest cost. BPCL’s net marketing margin rose 2.2x y-o-y to Rs. 3,597/tonne and outperformed peers with highest GRM of $2.5/bbl, refinery utilisation (105%) and market share gain in petrol/diesel. Earnings also benefited from inventory/forex gain of Rs. 711 crore/Rs. 96 crore. Q4FY21 earnings could moderate due to weak marketing margins and lower inventory gain (crude valued at $53/bbl vs. spot oil price of $58/bbl). Strong outlook for FY22 led by cyclical GRM recovery, volume growth and normalisation of auto fuel marketing margins.
Outlook
Privatisation could re-rate BPCL as valuation of refining & marketing assets could get aligned to that of global peers and create long-term value for investors. Hence, we maintain a Buy on BPCL with a revised PT of Rs. 520.
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