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India Equity Research Reports, IPO and Stock News
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RECO : ACCUMULATE TP : Rs671
Investment Rationale
§ Capacity expansion, upgradation and modernisation of BPCL’s Mumbai and Kochi refineries would increase its
crude throughput and refining margin going forward.
§ Bina refinery 50:50JV with Oman OIL is mechanically complete and will start commercial production at end
April 2011. The decision on the timing of IPO of Bina refinery would be taken based on market conditions.
§ BPCL’s subsidiary BRPL has made significant oil and gas discoveries in Brazil and Mozambique, which has
huge reserves potential of ~300-500mboe and 10tcf respectively (as per the news article). The success of
the E&P portfolio would be the key catalyst for the revenue and profitability of the company, going forward.
§ Higher product demand, especially in light distillate, has seen product spreads increasing in 2HFY11. Gross
refining margin was at $4.6/bbl as compared to $2.8/bbl, growth of 64% QoQ. We expect GRM’s to improve
further in the coming quarters, in tandem with the improvement in the global economy, which will improve the
petro product spreads.
Valuations
§ If US dollar continues to remain under pressure, the commodities are likely to stay firm including crude oil,
hurting the OMC’s performance. Also lower contribution from the government during the Q3FY11 has raised
concern for Q4 FY11 contribution as well. However at CMP of Rs.611 valuation looks attractive at 1.2x FY12
P/Bv, we maintain ACCUMULATE rating on the stock with TP of Rs.671.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RECO : ACCUMULATE TP : Rs671
Investment Rationale
§ Capacity expansion, upgradation and modernisation of BPCL’s Mumbai and Kochi refineries would increase its
crude throughput and refining margin going forward.
§ Bina refinery 50:50JV with Oman OIL is mechanically complete and will start commercial production at end
April 2011. The decision on the timing of IPO of Bina refinery would be taken based on market conditions.
§ BPCL’s subsidiary BRPL has made significant oil and gas discoveries in Brazil and Mozambique, which has
huge reserves potential of ~300-500mboe and 10tcf respectively (as per the news article). The success of
the E&P portfolio would be the key catalyst for the revenue and profitability of the company, going forward.
§ Higher product demand, especially in light distillate, has seen product spreads increasing in 2HFY11. Gross
refining margin was at $4.6/bbl as compared to $2.8/bbl, growth of 64% QoQ. We expect GRM’s to improve
further in the coming quarters, in tandem with the improvement in the global economy, which will improve the
petro product spreads.
Valuations
§ If US dollar continues to remain under pressure, the commodities are likely to stay firm including crude oil,
hurting the OMC’s performance. Also lower contribution from the government during the Q3FY11 has raised
concern for Q4 FY11 contribution as well. However at CMP of Rs.611 valuation looks attractive at 1.2x FY12
P/Bv, we maintain ACCUMULATE rating on the stock with TP of Rs.671.
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