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BPCL reported 3QFY11 PAT of Rs1.9bn much ahead of our expectations, driven by non core
items - higher GOI compensation for retail product under recoveries & inventory gains. That said,
GOI compensation of 45% for 9MFY11 still lags our full year assumption of 59%, thus requiring
massive contribution in 4QFY11.
3QFY11 EBITDA of Rs7.3bn (+17% yoy) was 47.7% ahead of our estimates. EBITDA
outperformance was driven by higher GOI payout for retail product underrecoveries &
inventory gains even though refinery throughput lagged our estimates.
During the quarter GOI contributed 51.5% of gross under recoveries, higher than our
assumption of 40%. This was the primary reason for higher-than-expected profits. That said,
GOI compensation is still lower than our full-year assumption of 59%.
BPCL reported GRMs of US$4.62/bbl (2QFY11 GRM of US$2.82/bbl) higher than our
expectation of US$3.94/bbl. Note these GRMs include crude inventory gains (not disclosed
separately) which can significantly inflate the true refining GRMs. To put into perspective,
MRPL (pure refiner) reported 3QFY11 GRMs of US$6/bbl (US$6.12/bbl in 2QFY11) which
includes GRMs attributable towards inventory movements of US$4.13/bbl. Product inventory
gains for BPCL during the quarter were Rs3.2bn compared to our estimate of Rs3bn.
Refinery throughput during the quarter was 5.03mt (-9.4% yoy, -10.2%qoq), 6.7% lower than
our estimate of 5.39mt. This was largely due to lower throughput at Mumbai refinery (2.97mt,
-5.7% yoy, -13.4% qoq).
Over the past three months, BPCL's stock price has corrected sharply despite a spate of good
news on global oil/gas discoveries, as the outlook for core domestic marketing operations has
worsened following a sharp rise in global oil prices. Our Hold rating on the stock is based on
core business valuation of Rs510/share (1.1x FY11F P/B). This is based on the assumption
that GOI would ensure reasonable profitability for the OMCs which we construe as 12-13%
ROE for BPCL (based on 11-12% ROE for HPCL).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
BPCL reported 3QFY11 PAT of Rs1.9bn much ahead of our expectations, driven by non core
items - higher GOI compensation for retail product under recoveries & inventory gains. That said,
GOI compensation of 45% for 9MFY11 still lags our full year assumption of 59%, thus requiring
massive contribution in 4QFY11.
3QFY11 EBITDA of Rs7.3bn (+17% yoy) was 47.7% ahead of our estimates. EBITDA
outperformance was driven by higher GOI payout for retail product underrecoveries &
inventory gains even though refinery throughput lagged our estimates.
During the quarter GOI contributed 51.5% of gross under recoveries, higher than our
assumption of 40%. This was the primary reason for higher-than-expected profits. That said,
GOI compensation is still lower than our full-year assumption of 59%.
BPCL reported GRMs of US$4.62/bbl (2QFY11 GRM of US$2.82/bbl) higher than our
expectation of US$3.94/bbl. Note these GRMs include crude inventory gains (not disclosed
separately) which can significantly inflate the true refining GRMs. To put into perspective,
MRPL (pure refiner) reported 3QFY11 GRMs of US$6/bbl (US$6.12/bbl in 2QFY11) which
includes GRMs attributable towards inventory movements of US$4.13/bbl. Product inventory
gains for BPCL during the quarter were Rs3.2bn compared to our estimate of Rs3bn.
Refinery throughput during the quarter was 5.03mt (-9.4% yoy, -10.2%qoq), 6.7% lower than
our estimate of 5.39mt. This was largely due to lower throughput at Mumbai refinery (2.97mt,
-5.7% yoy, -13.4% qoq).
Over the past three months, BPCL's stock price has corrected sharply despite a spate of good
news on global oil/gas discoveries, as the outlook for core domestic marketing operations has
worsened following a sharp rise in global oil prices. Our Hold rating on the stock is based on
core business valuation of Rs510/share (1.1x FY11F P/B). This is based on the assumption
that GOI would ensure reasonable profitability for the OMCs which we construe as 12-13%
ROE for BPCL (based on 11-12% ROE for HPCL).
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