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Upstream: A differentiator -Bharat Petroleum Corporation (BPCL), one of the leading oil & gas
companies in India, is engaged in refining, marketing and exploration &
production (E&P) activities. Over the years, BPCL has evolved from an
oil refining and marketing entity to a group also with a presence in the
E&P segment across India as well as globally. The success of the E&P
portfolio would be the key catalyst for the stock, going forward. The
increase in refining margins from US$4.1 per bbl in FY11E to US$5.5 per
bbl in FY13E would contribute to its profit growth. We expect BPCL to
report CAGR of 3.7% and 14.6% in revenues and net profits,
respectively, over FY11E-13E to | 1,59,004.5 crore and | 1,570.3 crore.
We recommend BUY rating on the stock with a price target of | 624.
Higher refining margins to drive profit growth
We believe an increase in crude oil throughput from 21.5 mmtpa in FY11E
to 22.6 mmtpa in FY13E coupled with an increase in refining margins
from US$4.1 per bbl in FY11E to US$5.5 per bbl in FY13E would drive its
profit growth in the next couple of years. BPCL, in a JV with Bharat Oman
Refineries (BORL), has set up a 6 mmtpa refinery at Bina, which is
expected to start commercial production from Q1FY12E.
E&P portfolio - key growth catalyst
BPCL, through its wholly-owned subsidiary, Bharat Petro Resources
(BRPL), has participating interests (PI) in 26 exploration blocks, in India
and abroad. BPRL has made significant oil & gas discoveries in Brazil and
Mozambique over the last couple of years that hold sizable reserve
potential. It plans to invest | 7,500 crore in E&P activities by FY15E.
Valuation
We believe the increase in refining margins and success of the E&P
portfolio would create value for investors, going forward. BPCL is trading
at 13.3x FY12E and 13x FY13E EPS of | 42.4 and | 43.4, respectively. We
are initiating coverage on the stock with BUY rating and price target of |
624 (valuation based on average of P/BV multiple: | 616 per share and P/E
multiple: | 631 per share).
Valuation
We believe the increase in refining margins and success of the E&P
portfolio would create value for investors, going forward. BPCL is trading
at 13.3x FY12E and 13x FY13E EPS of | 42.4 and | 43.4, respectively. We
are initiating coverage on the stock with BUY rating and price target of |
624 (valuation based on average of P/BV multiple: | 616 per share and P/E
multiple: | 631 per share).
BPCL’s EPS would decrease from | 43.4 (Brent oil prices: US$85 per bbl,
government share: 50%) to | 29.2 (government share: 54.5%) in FY13E if
crude oil prices sustain at US$100 per bbl. However, its EPS would
increase to | 81.3 per share in FY13E if crude oil prices decline to US$70
per bbl.
Exhibit 97: Valuation table
Valuation based on Price / BV Multiple
Adjusted Book Value for FY13E (|Crore) 13524.9
Adjusted number of shares (Crore) 32.8
Adjusted Book Value per share (|) 412.6
Add: Listed investments (25% discount to CMP) 61.7
Add: E&P value 86.2
Book Value of core business (| per share) 560.4
Multiple 1.1
Fair Value per share (|) 616
Valuation based on P / E multiple
Profit after tax for FY13E (| Crore) 1570.3
Less: Other Income adjusted for tax (| Crore) 527.5
Adjusted profit after tax for FY13E (| Crore) 1042.8
Number of shares (Crore) 36.2
Adjusted EPS for FY13E (|) 28.8
Multiple 12.0
Fair value per share without investments (|) 346.1
Add: Value of Investments (| per share)
Listed investments (25% discount to CMP) 55.9
Bharat Oman Refinery Ltd 59.4
Numaligarh Refinery 12.5
E&P value (BPRL) 86.2
Treasury shares 53.6
Other Investments 16.8
Fair value per share (|) 631
Weighted Target Price (| per share) 624
Source: ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Upstream: A differentiator -Bharat Petroleum Corporation (BPCL), one of the leading oil & gas
companies in India, is engaged in refining, marketing and exploration &
production (E&P) activities. Over the years, BPCL has evolved from an
oil refining and marketing entity to a group also with a presence in the
E&P segment across India as well as globally. The success of the E&P
portfolio would be the key catalyst for the stock, going forward. The
increase in refining margins from US$4.1 per bbl in FY11E to US$5.5 per
bbl in FY13E would contribute to its profit growth. We expect BPCL to
report CAGR of 3.7% and 14.6% in revenues and net profits,
respectively, over FY11E-13E to | 1,59,004.5 crore and | 1,570.3 crore.
We recommend BUY rating on the stock with a price target of | 624.
Higher refining margins to drive profit growth
We believe an increase in crude oil throughput from 21.5 mmtpa in FY11E
to 22.6 mmtpa in FY13E coupled with an increase in refining margins
from US$4.1 per bbl in FY11E to US$5.5 per bbl in FY13E would drive its
profit growth in the next couple of years. BPCL, in a JV with Bharat Oman
Refineries (BORL), has set up a 6 mmtpa refinery at Bina, which is
expected to start commercial production from Q1FY12E.
E&P portfolio - key growth catalyst
BPCL, through its wholly-owned subsidiary, Bharat Petro Resources
(BRPL), has participating interests (PI) in 26 exploration blocks, in India
and abroad. BPRL has made significant oil & gas discoveries in Brazil and
Mozambique over the last couple of years that hold sizable reserve
potential. It plans to invest | 7,500 crore in E&P activities by FY15E.
Valuation
We believe the increase in refining margins and success of the E&P
portfolio would create value for investors, going forward. BPCL is trading
at 13.3x FY12E and 13x FY13E EPS of | 42.4 and | 43.4, respectively. We
are initiating coverage on the stock with BUY rating and price target of |
624 (valuation based on average of P/BV multiple: | 616 per share and P/E
multiple: | 631 per share).
Valuation
We believe the increase in refining margins and success of the E&P
portfolio would create value for investors, going forward. BPCL is trading
at 13.3x FY12E and 13x FY13E EPS of | 42.4 and | 43.4, respectively. We
are initiating coverage on the stock with BUY rating and price target of |
624 (valuation based on average of P/BV multiple: | 616 per share and P/E
multiple: | 631 per share).
BPCL’s EPS would decrease from | 43.4 (Brent oil prices: US$85 per bbl,
government share: 50%) to | 29.2 (government share: 54.5%) in FY13E if
crude oil prices sustain at US$100 per bbl. However, its EPS would
increase to | 81.3 per share in FY13E if crude oil prices decline to US$70
per bbl.
Exhibit 97: Valuation table
Valuation based on Price / BV Multiple
Adjusted Book Value for FY13E (|Crore) 13524.9
Adjusted number of shares (Crore) 32.8
Adjusted Book Value per share (|) 412.6
Add: Listed investments (25% discount to CMP) 61.7
Add: E&P value 86.2
Book Value of core business (| per share) 560.4
Multiple 1.1
Fair Value per share (|) 616
Valuation based on P / E multiple
Profit after tax for FY13E (| Crore) 1570.3
Less: Other Income adjusted for tax (| Crore) 527.5
Adjusted profit after tax for FY13E (| Crore) 1042.8
Number of shares (Crore) 36.2
Adjusted EPS for FY13E (|) 28.8
Multiple 12.0
Fair value per share without investments (|) 346.1
Add: Value of Investments (| per share)
Listed investments (25% discount to CMP) 55.9
Bharat Oman Refinery Ltd 59.4
Numaligarh Refinery 12.5
E&P value (BPRL) 86.2
Treasury shares 53.6
Other Investments 16.8
Fair value per share (|) 631
Weighted Target Price (| per share) 624
Source: ICICIdirect.com Research
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