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BPCL: Government support saves the day
BPCL reported a PAT of Rs1.9bn for Q3FY11 owing to
the central government’s compensation of Rs18.1bn.
Improvement in petroleum product spreads led to
higher average GRMs for the quarter at US$4.6/bbl (vs
US$2.8/bbl in Q2FY11 and US$2.7/bbl in Q3FY10).
Higher petroleum product prices result in higher
revenue: BPCL’s Q3 revenue (including the government’s
compensation) increased 14.0% YoY and 3.5% QoQ to
Rs366.9bn from Rs321.8bn in Q3FY10, on the back of
higher crude prices which led to higher product prices.
Other expenditure was up 48.0% YoY at Rs19.4bn as it also
included Rs1.8bn forex losses incurred during the quarter
(in Q3FY10 the company reported forex gains). The
company reported operating profit of Rs7.5bn against
Rs6.4bn in Q3FY10.
Tax provisioning impacts PAT: Interest cost jumped
9.3% YoY to Rs2.7bn (Rs2.5bn in Q3FY10) due to higher
borrowings. Other income was lower on a YoY basis due
to forex gains in Q3FY10 which were included in other
income. Tax provisioning for earlier years was Rs1.1bn
which led to effective tax rate jumping to 54.8%. Thus, PAT
for Q3FY11 was down 50.6% YoY to Rs1.9bn.
Positive on E&P segment, upgrade to Buy: Although
BPCL’s legacy refining and marketing business is marred
by government policies, its E&P initiative has been
yielding positive results. Recently, the company made
fifth gas discovery in its Mozambique block which is
expected to hold good potential. We believe the E&P story
is likely to drive valuations hereon and hence we upgrade
the stock from Hold to Buy.
Valuation
E&P initiatives to unfold; upgrade to Buy
BPCL reported positive bottom-line in Q3FY11 on account of government compensation.
Incrementally, the under-recoveries for Q4FY11 are likely to jump higher due to strong crude prices
and product crack spreads. Even though BPCL’s legacy refining and marketing business is marred by
government policies, BPCL’s E&P initiative bears potential. Recently the company announced a gas
discovery in its offshore block in Rovuma basin, Mozambique. This fifth successful gas discovery
signifies the potential of the block. We believe that in the absence of near term clarity on
government policies, BPCL’s E&P initiative would drive the valuations. Hence, we upgrade the stock
to Buy from Hold with a revised price target of Rs654/share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
BPCL: Government support saves the day
BPCL reported a PAT of Rs1.9bn for Q3FY11 owing to
the central government’s compensation of Rs18.1bn.
Improvement in petroleum product spreads led to
higher average GRMs for the quarter at US$4.6/bbl (vs
US$2.8/bbl in Q2FY11 and US$2.7/bbl in Q3FY10).
Higher petroleum product prices result in higher
revenue: BPCL’s Q3 revenue (including the government’s
compensation) increased 14.0% YoY and 3.5% QoQ to
Rs366.9bn from Rs321.8bn in Q3FY10, on the back of
higher crude prices which led to higher product prices.
Other expenditure was up 48.0% YoY at Rs19.4bn as it also
included Rs1.8bn forex losses incurred during the quarter
(in Q3FY10 the company reported forex gains). The
company reported operating profit of Rs7.5bn against
Rs6.4bn in Q3FY10.
Tax provisioning impacts PAT: Interest cost jumped
9.3% YoY to Rs2.7bn (Rs2.5bn in Q3FY10) due to higher
borrowings. Other income was lower on a YoY basis due
to forex gains in Q3FY10 which were included in other
income. Tax provisioning for earlier years was Rs1.1bn
which led to effective tax rate jumping to 54.8%. Thus, PAT
for Q3FY11 was down 50.6% YoY to Rs1.9bn.
Positive on E&P segment, upgrade to Buy: Although
BPCL’s legacy refining and marketing business is marred
by government policies, its E&P initiative has been
yielding positive results. Recently, the company made
fifth gas discovery in its Mozambique block which is
expected to hold good potential. We believe the E&P story
is likely to drive valuations hereon and hence we upgrade
the stock from Hold to Buy.
Valuation
E&P initiatives to unfold; upgrade to Buy
BPCL reported positive bottom-line in Q3FY11 on account of government compensation.
Incrementally, the under-recoveries for Q4FY11 are likely to jump higher due to strong crude prices
and product crack spreads. Even though BPCL’s legacy refining and marketing business is marred by
government policies, BPCL’s E&P initiative bears potential. Recently the company announced a gas
discovery in its offshore block in Rovuma basin, Mozambique. This fifth successful gas discovery
signifies the potential of the block. We believe that in the absence of near term clarity on
government policies, BPCL’s E&P initiative would drive the valuations. Hence, we upgrade the stock
to Buy from Hold with a revised price target of Rs654/share.
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