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Poor fare; but bottom closer
Forex losses continue to hit hard
CPCL reported another poor quarter with in-line revenue of INR111bn
but forex losses hitting the EBITDA and bottom-line. The Q3FY12
EBITDA came in at INR619mn, significantly below Street estimates of
INR1.5-2.0bn, while CPCL reported a net loss of INR634mn. The
company reported GRMs of USD3.36/bbl, below our estimate of
USD4.3/bbl. The Q3FY12 throughput was also affected marginally due
to the cyclone hitting the east coast leading to a standstill in crude
supply around Dec’11-end.
Key takeaways from concall: GRMs break-up and refinery plans
The inventory gain for Q3FY12 was INR1.48bn (USD1.48/bbl),
while the exchange related losses net of crude (INR2.23bn) and
product gains (INR0.20bn) were INR2.03bn (USD2.04/bbl). With
the reported GRMs of USD3.36/bbl, our analysis suggests that the
operational margin was ~USD3.9/bbl. We expect better Q4FY12
GRMs, as well as FY13 due to recovery in spreads of light products.
CPCL achieved ~70% of distillate yield in Q3FY12 (22% light and
47.9% middle distillates) while the fuel and loss was higher 9.8%
due to additional fuel consumption for secondary units. Post the
residue upgradation project in FY13, CPCL expects the distillate
yield to reach 85-90%. Also, CPCL would be taking a 2-month
shutdown in Jun/Jul 2012, post which another 0.6MMT of
capacity will be blended in through debottlenecking.
Capex for FY12 so far stands at INR3.2bn, and it should be INR5bn
for FY12 and around INR8bn for FY13.
Still some pain left, but bottom getting closer; Upgrade to Reduce
We upgrade CPCL to Reduce from Sell as we see the stock bottoming
out after declining 14% and under-performing the Sensex by 23%
since our downgrade in Oct’11. We see operational concerns hurting
earnings for another 2-3 quarters, which should keep CPCL under
pressure. In the near term, we would turn positive only if CPCL corrects
another 10-12% from the current levels. CPCL trades at 6x EV/EBITDA
on FY14 estimates, a slightly rich multiple for a simple refiner. We value
CPCL at 5.5x EV/EBITDA, revising our TP to INR160/sh.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Poor fare; but bottom closer
Forex losses continue to hit hard
CPCL reported another poor quarter with in-line revenue of INR111bn
but forex losses hitting the EBITDA and bottom-line. The Q3FY12
EBITDA came in at INR619mn, significantly below Street estimates of
INR1.5-2.0bn, while CPCL reported a net loss of INR634mn. The
company reported GRMs of USD3.36/bbl, below our estimate of
USD4.3/bbl. The Q3FY12 throughput was also affected marginally due
to the cyclone hitting the east coast leading to a standstill in crude
supply around Dec’11-end.
Key takeaways from concall: GRMs break-up and refinery plans
The inventory gain for Q3FY12 was INR1.48bn (USD1.48/bbl),
while the exchange related losses net of crude (INR2.23bn) and
product gains (INR0.20bn) were INR2.03bn (USD2.04/bbl). With
the reported GRMs of USD3.36/bbl, our analysis suggests that the
operational margin was ~USD3.9/bbl. We expect better Q4FY12
GRMs, as well as FY13 due to recovery in spreads of light products.
CPCL achieved ~70% of distillate yield in Q3FY12 (22% light and
47.9% middle distillates) while the fuel and loss was higher 9.8%
due to additional fuel consumption for secondary units. Post the
residue upgradation project in FY13, CPCL expects the distillate
yield to reach 85-90%. Also, CPCL would be taking a 2-month
shutdown in Jun/Jul 2012, post which another 0.6MMT of
capacity will be blended in through debottlenecking.
Capex for FY12 so far stands at INR3.2bn, and it should be INR5bn
for FY12 and around INR8bn for FY13.
Still some pain left, but bottom getting closer; Upgrade to Reduce
We upgrade CPCL to Reduce from Sell as we see the stock bottoming
out after declining 14% and under-performing the Sensex by 23%
since our downgrade in Oct’11. We see operational concerns hurting
earnings for another 2-3 quarters, which should keep CPCL under
pressure. In the near term, we would turn positive only if CPCL corrects
another 10-12% from the current levels. CPCL trades at 6x EV/EBITDA
on FY14 estimates, a slightly rich multiple for a simple refiner. We value
CPCL at 5.5x EV/EBITDA, revising our TP to INR160/sh.
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