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Bharat Petroleum (BPCL)
Energy
Results marred by refining margins and forex losses. BPCL reported 2QFY12 net
loss at `32.3 bn versus net loss of `25.6 bn in 1QFY12; our estimated loss was `34.1
bn. We note that the quarterly results are not comparable given the fluctuation in
timing and quantum of government compensation. We maintain our ADD rating on
BPCL given 16% potential upside to our revised target price of `720 (`780 previously).
Earnings impacted by large net under-recovery, forex losses and lower refining margins
BPCL reported 2QFY12 net income at –`32.3 bn versus –`25.6 bn in 1QFY12 and `21.4 bn in
2QFY11. Reported 2QFY12 EBITDA was at –`26.9 bn versus –`21.6 bn in 1QFY12 and `24.9 bn in
2QFY11; our estimate was at –`28.8 bn. The qoq swing in earnings reflects (1) lower refining
margins at US$1.6/bbl versus US$3/bbl in 1QFY12 and (2) foreign exchange loss of `8 bn. This was
partly compensated by (1) lower net under-recovery of `32.2 bn in 2QFY12 versus `33.6 bn in
1QFY12, (2) higher crude throughput at 5.6 mn tons versus 5.2 mn tons in 1QFY12 and (3) lower
staff cost at `4.4 bn (-33% qoq).
Refining margins decline qoq; domestic sales volumes increase 6.7% yoy
BPCL’s 2QFY12 refining margins were at US$1.6/bbl versus US$3/bbl in 1QFY12 and US$3.6/bbl in
2QFY11. The refining margins were impacted by adventitious/inventory loss. BPCL’s crude
throughput stood at 5.6 mn tons (-0.4% yoy and +7.3% qoq) in 2QFY12. 2QFY12 sales volumes
(domestic) increased 6.7% yoy to 7 mn tons. The yoy growth in sales was led by strong growth in
diesel, LPG and ATF sales which was partially offset by decline in sales of fuel oil and naphtha.
Stock performance will depend on (1) oil prices and (2) government action
We maintain an ADD rating on BPCL given 16% upside to our target price of `720 based on 10X
FY2013E adjusted EPS of `45 plus value of investments. However, we highlight that the near-term
stock performance will depend on (1) crude oil prices, (2) exchange rate, (3) government’s
willingness and ability to increase diesel prices at current levels and (4) subsidy-sharing mechanism
formulated by the government. We note that the situation with regards to the overall gross underrecoveries
is reaching precarious levels led by (1) weakening of the Rupee and (2) sharp expansion
in product cracks. Exhibit 2 gives the marketing losses for the recent week and compares the same
with the losses before the announcement of price hikes and duty rejig in June 2011.
Revised earnings; maintain ADD with a target price of `720
We have revised our FY2012-14E EPS to `33 (-39%), `49.5 (-10%) and `58.3 (-5%) to reflect (1)
lower refining margins, (2) revised exchange rate assumptions, (3) 2QFY12 results and (4) other
minor changes. Key downside risk stems from higher-than-expected net under-recoveries.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bharat Petroleum (BPCL)
Energy
Results marred by refining margins and forex losses. BPCL reported 2QFY12 net
loss at `32.3 bn versus net loss of `25.6 bn in 1QFY12; our estimated loss was `34.1
bn. We note that the quarterly results are not comparable given the fluctuation in
timing and quantum of government compensation. We maintain our ADD rating on
BPCL given 16% potential upside to our revised target price of `720 (`780 previously).
Earnings impacted by large net under-recovery, forex losses and lower refining margins
BPCL reported 2QFY12 net income at –`32.3 bn versus –`25.6 bn in 1QFY12 and `21.4 bn in
2QFY11. Reported 2QFY12 EBITDA was at –`26.9 bn versus –`21.6 bn in 1QFY12 and `24.9 bn in
2QFY11; our estimate was at –`28.8 bn. The qoq swing in earnings reflects (1) lower refining
margins at US$1.6/bbl versus US$3/bbl in 1QFY12 and (2) foreign exchange loss of `8 bn. This was
partly compensated by (1) lower net under-recovery of `32.2 bn in 2QFY12 versus `33.6 bn in
1QFY12, (2) higher crude throughput at 5.6 mn tons versus 5.2 mn tons in 1QFY12 and (3) lower
staff cost at `4.4 bn (-33% qoq).
Refining margins decline qoq; domestic sales volumes increase 6.7% yoy
BPCL’s 2QFY12 refining margins were at US$1.6/bbl versus US$3/bbl in 1QFY12 and US$3.6/bbl in
2QFY11. The refining margins were impacted by adventitious/inventory loss. BPCL’s crude
throughput stood at 5.6 mn tons (-0.4% yoy and +7.3% qoq) in 2QFY12. 2QFY12 sales volumes
(domestic) increased 6.7% yoy to 7 mn tons. The yoy growth in sales was led by strong growth in
diesel, LPG and ATF sales which was partially offset by decline in sales of fuel oil and naphtha.
Stock performance will depend on (1) oil prices and (2) government action
We maintain an ADD rating on BPCL given 16% upside to our target price of `720 based on 10X
FY2013E adjusted EPS of `45 plus value of investments. However, we highlight that the near-term
stock performance will depend on (1) crude oil prices, (2) exchange rate, (3) government’s
willingness and ability to increase diesel prices at current levels and (4) subsidy-sharing mechanism
formulated by the government. We note that the situation with regards to the overall gross underrecoveries
is reaching precarious levels led by (1) weakening of the Rupee and (2) sharp expansion
in product cracks. Exhibit 2 gives the marketing losses for the recent week and compares the same
with the losses before the announcement of price hikes and duty rejig in June 2011.
Revised earnings; maintain ADD with a target price of `720
We have revised our FY2012-14E EPS to `33 (-39%), `49.5 (-10%) and `58.3 (-5%) to reflect (1)
lower refining margins, (2) revised exchange rate assumptions, (3) 2QFY12 results and (4) other
minor changes. Key downside risk stems from higher-than-expected net under-recoveries.
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