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Key Takeaways
New government initiatives to reduce subsidy in medium term
The management expects the recently announced government initiatives on PDS
kerosene and domestic LPG to help reduced subsidy over the medium term.
The LPG initiative will be implemented in two phases; phase-1 (internal systems are
ready) will limit the number of cylinders per household while phase-2 (post UID
scheme implementation) will involve selling LPG cylinders at market price and
transferring subsidy in cash directly to the eligible LPG customers' bank accounts.
E&P reserves to be published by end-2013
The reserve estimates for BPCL's successful E&P discoveries in Brazil (2) and
Mozambique (4) are likely to be announced by end-2013, post appraisal by thirdparty
consultants.
BPCL plans to spend INR100b (USD250m each in FY12/13, INR24b spent till date) on
E&P (BPCL share) over the next five years and expects production to commence in
2017/18, first in Mozambique.
Gas production at Mozambique is likely to be evacuated through LNG route.
To spend INR400b in next five years v/s INR250b in last five
As against INR250b spent in the last five-year plan, BPCL expects to spend ~INR400b
in the next five-year plan, driven by refinery expansion and E&P spends.
Capex includes planned capacity expansion of Kochi refinery from 9.5mmtpa to
15mmtpa and petrochem complex with an investment of INR60b. Kochi refinery
complexity will increase from the current 5 to 9.
Bina refinery utilization rate to reach 80% by 4QFY12
Most of the processing and support facilities like SPM, crude oil terminal, and 935km
crude pipeline have already been commissioned.
Despite some power plant related delays, the management expects utilization to
reach 80% in 4QFY12 at its new 6mmpta, INR122b Bina refinery (JV with Bharat
Oman, BPCL stake 49%).
Once the Bina refinery stabilizes and operates for a full year, the management plans
to further increase capacity from 6mmtpa to 8.5mmtpa by FY15/16.
Valuation and view
In the event of subsidy rationalization and decontrol of retail fuel prices, marketing
profits would improve and the stock could see a re-rating.
The stock trades at 13.1x FY12E EPS of INR52.6 and 1.4x FY12E BV. E&P business
could provide upside potential. Buy.
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
New government initiatives to reduce subsidy in medium term
The management expects the recently announced government initiatives on PDS
kerosene and domestic LPG to help reduced subsidy over the medium term.
The LPG initiative will be implemented in two phases; phase-1 (internal systems are
ready) will limit the number of cylinders per household while phase-2 (post UID
scheme implementation) will involve selling LPG cylinders at market price and
transferring subsidy in cash directly to the eligible LPG customers' bank accounts.
E&P reserves to be published by end-2013
The reserve estimates for BPCL's successful E&P discoveries in Brazil (2) and
Mozambique (4) are likely to be announced by end-2013, post appraisal by thirdparty
consultants.
BPCL plans to spend INR100b (USD250m each in FY12/13, INR24b spent till date) on
E&P (BPCL share) over the next five years and expects production to commence in
2017/18, first in Mozambique.
Gas production at Mozambique is likely to be evacuated through LNG route.
To spend INR400b in next five years v/s INR250b in last five
As against INR250b spent in the last five-year plan, BPCL expects to spend ~INR400b
in the next five-year plan, driven by refinery expansion and E&P spends.
Capex includes planned capacity expansion of Kochi refinery from 9.5mmtpa to
15mmtpa and petrochem complex with an investment of INR60b. Kochi refinery
complexity will increase from the current 5 to 9.
Bina refinery utilization rate to reach 80% by 4QFY12
Most of the processing and support facilities like SPM, crude oil terminal, and 935km
crude pipeline have already been commissioned.
Despite some power plant related delays, the management expects utilization to
reach 80% in 4QFY12 at its new 6mmpta, INR122b Bina refinery (JV with Bharat
Oman, BPCL stake 49%).
Once the Bina refinery stabilizes and operates for a full year, the management plans
to further increase capacity from 6mmtpa to 8.5mmtpa by FY15/16.
Valuation and view
In the event of subsidy rationalization and decontrol of retail fuel prices, marketing
profits would improve and the stock could see a re-rating.
The stock trades at 13.1x FY12E EPS of INR52.6 and 1.4x FY12E BV. E&P business
could provide upside potential. Buy.
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