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Throughput at 5.0 mmt; Q3FY11 blended GRM at USD 4.6/bbl
Bharat Petroleum Corporation (BPCL) reported refining throughput at 5.0 mmt in
Q3FY11, lower 12.0% Q-o-Q and 10.5% Y-o-Y. Mumbai refining throughput dipped
15.4% due to shutdown of refinery during the quarter. Quarterly blended GRMs, at
USD 4.6/bbl (USD 2.9/bbl in Q2FY11, USD 1.2/bbl in Q3FY10), were lower than
our estimate of USD 5.1/bbl due to impact of shutdowns. Mumbai refinery reported
GRMs of USD 4.4/bbl (USD 3.4/bbl in Q2FY11, USD 0.0/bbl in Q3FY10), while for
Kochi it was USD 5.0/bbl (USD 2.1/bbl in Q2FY11, USD 2.8/bbl in Q3FY10).
Net under-recovery of INR 2.4 bn; marketing sales higher
BPCL’s marketing gross under-recoveries for the quarter were at INR 35.2 bn
(estimated at INR 36.2 bn). Government provided subsidy of INR 21.1 bn
(assumed nil for Q3FY11) as partial compensation for Q3FY11. BPCL received
upstream discount of INR 11.7 bn from ONGC, OIL, and GAIL collectively (33.3%
of gross under-recoveries in Q3FY11). Net under-recovery for Q3FY11 was at INR
2.4 bn; 9mFY11 cumulative net under-recovery stood at INR 20.3 bn. Domestic
marketing sales for Q3FY11, at 7.4 mmt, jumped 21.7% Q-o-Q and 13.6% Y-o-Y
due to higher domestic sales of petrol and LPG at 992 TMT (+6.6% Q-o-Q, +10.4
Y-o-Y) and 924 TMT (+5.4% Q-o-Q, +10.5 Y-o-Y), respectively. With the provision
of government subsidy, BPCL reported PAT of INR 1.9 bn for Q3FY11.
Outlook and valuations: Bullish on crude; maintain ‘REDUCE’
We maintain our bearish stance on OMCs due to uncertainty regarding subsidy
sharing and diesel deregulation. We continue to believe that diesel de-regulation
may not happen in the near term due to upcoming assembly elections in certain
key states, which could increase OMCs’ under recoveries. Increasing diesel spreads
have led us to increase our FY11 and FY12 industry wide under-recovery estimate
to INR 690 bn and INR 820 bn, respectively. This has reduced our FY11 and FY12
earnings estimates for the company. We have also cut our March 2012 SOTP by
8%, to INR 637/share (INR 693/share). Though we have a positive stance on
crude, we continue to believe that earnings for OMCs will remain uncertain. Hence,
we maintain our ‘REDUCE/Sector Underperformer’ recommendation/rating on
the stock. At INR 585, BPCL is trading at 9.1x and 6.8x our FY11E and FY12E
EV/EBITDA, respectively.
Throughput at 5.0 mmt; Q3FY11 blended GRM at USD 4.6/bbl
Bharat Petroleum Corporation (BPCL) reported refining throughput at 5.0 mmt in Q3FY11,
lower 12.0% Q-o-Q and 10.5% Y-o-Y. Mumbai refining throughput dipped 15.4% due to
shutdown of refinery during the quarter. Quarterly blended GRMs, at USD 4.6/bbl (USD
2.9/bbl in Q2FY11, USD 1.2/bbl in Q3FY10), were lower than our estimate of USD 5.1/bbl
due to impact of shutdowns. Mumbai refinery reported GRMs of USD 4.4/bbl (USD 3.4/bbl
in Q2FY11, USD 0.0/bbl in Q3FY10), while for Kochi it was USD 5.0/bbl (USD 2.1/bbl in
Q2FY11, USD 2.8/bbl in Q3FY10).
Indian crude average for Q3FY11 was at USD 85.7/bbl, up 13.6% Q-o-Q and 13.5% Y-o-Y.
The INR appreciated 3.5% Q-o-Q and 3.8% Y-o-Y during the quarter; average USD/INR for
Q3FY11 was 44.86.
Marketing sales higher Q-o-Q with increase in sales of domestic fuels
Domestic marketing sales for Q3FY11, at 7.4 mmt, jumped 21.7% Q-o-Q and 13.6% Y-o-Y
due to higher domestic sales of petrol and LPG at 992 TMT (+6.6% Q-o-Q, +10.4 Y-o-Y)
and 924 TMT (+5.4% Q-o-Q, +10.5 Y-o-Y), respectively. HSD sales (3,435 TMT for
Q3FY11) were up 7.3% Q-o-Q, but flat Y-o-Y. Sales of SKO were lower 1.3% Y-o-Y.
Net under-recovery of INR 2.4 bn for Q3FY11, INR 21.1 bn subsidy from GoI
BPCL’s marketing gross under-recoveries for the quarter were at INR 35.2 bn (estimated at
INR 36.2 bn). Government provided subsidy of INR 21.1 bn (assumed nil for Q3FY11) as
partial compensation for Q3FY11. BPCL received upstream discount of INR 11.7 bn from
ONGC, OIL, and GAIL collectively (33.3% of gross under-recoveries in Q3FY11). Net underrecovery
for Q3FY11 was at INR 2.4 bn; 9mFY11 cumulative net under-recovery stood at
INR 20.3 bn. With the provision of government subsidy, BPCL reported PAT of INR 1.9 bn
for Q3FY11.
Outlook and valuations: Bullish on crude; maintain ‘REDUCE’
We maintain our bearish stance on OMCs due to uncertainty regarding subsidy sharing and
diesel deregulation. We continue to believe that diesel de-regulation may not happen in the
near term due to upcoming assembly elections in certain key states, which could increase
OMCs’ under recoveries. Increasing diesel spreads have led us to increase our FY11 and
FY12 industry wide under-recovery estimate to INR 690 bn and INR 820 bn, respectively.
This has reduced our FY11 and FY12 earnings estimates for the company. We have also cut
our March 2012 SOTP by 8%, to INR 637/share (INR 693/share). Though we have a
positive stance on crude, we continue to believe that earnings for OMCs will remain
uncertain. Hence, we maintain our ‘REDUCE/Sector Underperformer’
recommendation/rating on the stock. At INR 585, BPCL is trading at 9.1x and 6.8x our
FY11E and FY12E EV/EBITDA, respectively.
Company Description
BPCL is a leading player in the Indian petroleum industry with market share of 16.9% in
refining and 18.5% in marketing. The company is increasing its investment in the
pipelines business, to stabilise margins, and venturing into E&P business. BPCL, along
with its subsidiaries, owns three refineries with a combined refining capacity of 22.5
mmtpa, and is expanding its refining capacity with a new refinery in Bina (6 mmtpa) and
expansion of the Kochi refinery (from 7.5 mmtpa to 10 mmtpa).
Investment Theme
BPCL is an integrated refining and marketing company, engaged in selling petroleum
products, and has a higher presence in metros than peers. This gives it the advantage of
greater margins, higher growth rate, and lower competition. The company’s IT
infrastructure and loyalty programs add to its competitive advantage. BPCL’s expansion
of its current refining capacity removes product supply risks.
The gradual phasing out of auto-fuel subsidies and continued government support (in the
form of oil bonds) will help reduce under-recoveries of oil marketing companies.
Key Risks
Increase in crude prices will raise under-recoveries of oil marketing companies.
Any regulatory or policy change in the form of reduction in duty protection, reduction in
quantum of oil bonds, or a cut in retail prices could impact BPCL’s earnings.
Competition from private players in auto fuel marketing may result in reduction of
market share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Throughput at 5.0 mmt; Q3FY11 blended GRM at USD 4.6/bbl
Bharat Petroleum Corporation (BPCL) reported refining throughput at 5.0 mmt in
Q3FY11, lower 12.0% Q-o-Q and 10.5% Y-o-Y. Mumbai refining throughput dipped
15.4% due to shutdown of refinery during the quarter. Quarterly blended GRMs, at
USD 4.6/bbl (USD 2.9/bbl in Q2FY11, USD 1.2/bbl in Q3FY10), were lower than
our estimate of USD 5.1/bbl due to impact of shutdowns. Mumbai refinery reported
GRMs of USD 4.4/bbl (USD 3.4/bbl in Q2FY11, USD 0.0/bbl in Q3FY10), while for
Kochi it was USD 5.0/bbl (USD 2.1/bbl in Q2FY11, USD 2.8/bbl in Q3FY10).
Net under-recovery of INR 2.4 bn; marketing sales higher
BPCL’s marketing gross under-recoveries for the quarter were at INR 35.2 bn
(estimated at INR 36.2 bn). Government provided subsidy of INR 21.1 bn
(assumed nil for Q3FY11) as partial compensation for Q3FY11. BPCL received
upstream discount of INR 11.7 bn from ONGC, OIL, and GAIL collectively (33.3%
of gross under-recoveries in Q3FY11). Net under-recovery for Q3FY11 was at INR
2.4 bn; 9mFY11 cumulative net under-recovery stood at INR 20.3 bn. Domestic
marketing sales for Q3FY11, at 7.4 mmt, jumped 21.7% Q-o-Q and 13.6% Y-o-Y
due to higher domestic sales of petrol and LPG at 992 TMT (+6.6% Q-o-Q, +10.4
Y-o-Y) and 924 TMT (+5.4% Q-o-Q, +10.5 Y-o-Y), respectively. With the provision
of government subsidy, BPCL reported PAT of INR 1.9 bn for Q3FY11.
Outlook and valuations: Bullish on crude; maintain ‘REDUCE’
We maintain our bearish stance on OMCs due to uncertainty regarding subsidy
sharing and diesel deregulation. We continue to believe that diesel de-regulation
may not happen in the near term due to upcoming assembly elections in certain
key states, which could increase OMCs’ under recoveries. Increasing diesel spreads
have led us to increase our FY11 and FY12 industry wide under-recovery estimate
to INR 690 bn and INR 820 bn, respectively. This has reduced our FY11 and FY12
earnings estimates for the company. We have also cut our March 2012 SOTP by
8%, to INR 637/share (INR 693/share). Though we have a positive stance on
crude, we continue to believe that earnings for OMCs will remain uncertain. Hence,
we maintain our ‘REDUCE/Sector Underperformer’ recommendation/rating on
the stock. At INR 585, BPCL is trading at 9.1x and 6.8x our FY11E and FY12E
EV/EBITDA, respectively.
Throughput at 5.0 mmt; Q3FY11 blended GRM at USD 4.6/bbl
Bharat Petroleum Corporation (BPCL) reported refining throughput at 5.0 mmt in Q3FY11,
lower 12.0% Q-o-Q and 10.5% Y-o-Y. Mumbai refining throughput dipped 15.4% due to
shutdown of refinery during the quarter. Quarterly blended GRMs, at USD 4.6/bbl (USD
2.9/bbl in Q2FY11, USD 1.2/bbl in Q3FY10), were lower than our estimate of USD 5.1/bbl
due to impact of shutdowns. Mumbai refinery reported GRMs of USD 4.4/bbl (USD 3.4/bbl
in Q2FY11, USD 0.0/bbl in Q3FY10), while for Kochi it was USD 5.0/bbl (USD 2.1/bbl in
Q2FY11, USD 2.8/bbl in Q3FY10).
Indian crude average for Q3FY11 was at USD 85.7/bbl, up 13.6% Q-o-Q and 13.5% Y-o-Y.
The INR appreciated 3.5% Q-o-Q and 3.8% Y-o-Y during the quarter; average USD/INR for
Q3FY11 was 44.86.
Marketing sales higher Q-o-Q with increase in sales of domestic fuels
Domestic marketing sales for Q3FY11, at 7.4 mmt, jumped 21.7% Q-o-Q and 13.6% Y-o-Y
due to higher domestic sales of petrol and LPG at 992 TMT (+6.6% Q-o-Q, +10.4 Y-o-Y)
and 924 TMT (+5.4% Q-o-Q, +10.5 Y-o-Y), respectively. HSD sales (3,435 TMT for
Q3FY11) were up 7.3% Q-o-Q, but flat Y-o-Y. Sales of SKO were lower 1.3% Y-o-Y.
Net under-recovery of INR 2.4 bn for Q3FY11, INR 21.1 bn subsidy from GoI
BPCL’s marketing gross under-recoveries for the quarter were at INR 35.2 bn (estimated at
INR 36.2 bn). Government provided subsidy of INR 21.1 bn (assumed nil for Q3FY11) as
partial compensation for Q3FY11. BPCL received upstream discount of INR 11.7 bn from
ONGC, OIL, and GAIL collectively (33.3% of gross under-recoveries in Q3FY11). Net underrecovery
for Q3FY11 was at INR 2.4 bn; 9mFY11 cumulative net under-recovery stood at
INR 20.3 bn. With the provision of government subsidy, BPCL reported PAT of INR 1.9 bn
for Q3FY11.
Outlook and valuations: Bullish on crude; maintain ‘REDUCE’
We maintain our bearish stance on OMCs due to uncertainty regarding subsidy sharing and
diesel deregulation. We continue to believe that diesel de-regulation may not happen in the
near term due to upcoming assembly elections in certain key states, which could increase
OMCs’ under recoveries. Increasing diesel spreads have led us to increase our FY11 and
FY12 industry wide under-recovery estimate to INR 690 bn and INR 820 bn, respectively.
This has reduced our FY11 and FY12 earnings estimates for the company. We have also cut
our March 2012 SOTP by 8%, to INR 637/share (INR 693/share). Though we have a
positive stance on crude, we continue to believe that earnings for OMCs will remain
uncertain. Hence, we maintain our ‘REDUCE/Sector Underperformer’
recommendation/rating on the stock. At INR 585, BPCL is trading at 9.1x and 6.8x our
FY11E and FY12E EV/EBITDA, respectively.
Company Description
BPCL is a leading player in the Indian petroleum industry with market share of 16.9% in
refining and 18.5% in marketing. The company is increasing its investment in the
pipelines business, to stabilise margins, and venturing into E&P business. BPCL, along
with its subsidiaries, owns three refineries with a combined refining capacity of 22.5
mmtpa, and is expanding its refining capacity with a new refinery in Bina (6 mmtpa) and
expansion of the Kochi refinery (from 7.5 mmtpa to 10 mmtpa).
Investment Theme
BPCL is an integrated refining and marketing company, engaged in selling petroleum
products, and has a higher presence in metros than peers. This gives it the advantage of
greater margins, higher growth rate, and lower competition. The company’s IT
infrastructure and loyalty programs add to its competitive advantage. BPCL’s expansion
of its current refining capacity removes product supply risks.
The gradual phasing out of auto-fuel subsidies and continued government support (in the
form of oil bonds) will help reduce under-recoveries of oil marketing companies.
Key Risks
Increase in crude prices will raise under-recoveries of oil marketing companies.
Any regulatory or policy change in the form of reduction in duty protection, reduction in
quantum of oil bonds, or a cut in retail prices could impact BPCL’s earnings.
Competition from private players in auto fuel marketing may result in reduction of
market share.
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