Bharat Petroleum Corporation Ltd. share price target

We believe that the current valuation multiples (8.5x EV/e FY21) are already pricing in a full privatisation scenario. We believe that only potential improvement in earnings and cash flows can drive re-rating of the stock. But this will obviously be realized with a lag and is contingent upon the stake acquirer's ability to bring about efficiencies. Our SOTP target is Rs 452/sh (5.5x Dec-21E EV/e for standalone refining, 6.0x Dec-21E EV/e for marketing and pipeline business and Rs 145/sh for other investments). We maintain NEUTRAL on BPCL with a TP of Rs 452 (vs consensus TP of Rs 513) following a performance in-line with our PAT estimates in 3QFY20. 8.2% beat at EBITDA level was due to higher inventory gains of Rs 5.32bn vs est Rs 3.63bn.

BPCL's Q3FY20 EBITDA at Rs 27bn (up 3.6x YoY) outperformed estimates on higher GRMs (US$ 2.2/bbl ex-inventory).

Dismal Performance with No Improvement in GRM; Maintain REDUCE Bharat Petroleum Corporation Ltd. (BPCL) has delivered a disappointing performance in 3QFY20. It reported GRM of US$3.23/bbl below ours/consensus estimates of US$4.1/bbl. Petrol/diesel sales volume grew by 5.9%/(1.6%) YoY lower than the industry growth rate of 7.1%/0.2%. It clearly implies that BPCL has lost market share to private retailers during the quarter. EBITDA increased by 248% YoY and 14% QoQ to Rs 27bn (6% below the consensus estimate/8% higher than our estimate) mainly due to 12% YoY growth in crude throughput of refineries, comparative higher YoY GRM and improved net marketing margin on diesel. Net profit grew by 155% YoY (down 26%...

Average crude oil prices in Q3FY20 remained flattish compared to Q2FY20. Core marketing margins were steady during the quarter. In terms of marketing sales, BPCL reported growth of 3.3% YoY (led by LPG, motor spirit sales growth) to 11 MMT, marginally above our estimates. Going forward, we expect marketing sales volume to improve to 3.5-4.5% CAGR over the next two years. The crude throughput in Q3FY20 was up 13.3% YoY at 8.4 MMT, above our estimates. We estimate 44.2 MMT throughput for FY20E. Going forward, we estimate throughput of 45.8 MMT and 47.6...

Cyclical business fundamentals aggravated in Q3FY20 Singapore GRMs crashed to US$ 1.63/bbl (-75% QoQ), and petrochemical cracks declined ~20% QoQ.

Bharat Petroleum Corporation Ltd (BPCL) is one of India's leading oil & gas companies. It operates refineries located in Kochi, Mumbai, Bina and Numaligarh. The company's marketing infrastructure consists of...

BPCL remains a prized asset with fully integrated operations and accordingly, expect aggressive bidding by global oil majors. In a significant decision, the Government has given cabinet approval to transfer government shareholding (53.29%) in BPCL, ex of the Numaligarh refinery (NRL), to a strategic investor. Transfer of management control is positive and will help the government optimize value; potential receipt...

During 2013-18, consumption of petroleum products in India came in at ~6.4% CAGR as against 1.6%/5.2%/-3.5% for the US/China/ Japan respectively. However, rise in urbanization combined with better road connectivity is expected to result in sustained high growth of auto fuel consumption, despite the onslaught of CNG and EVs. Most metros are well proliferated in terms of retail outlets. While constructing depots and terminals is still not a major hurdle, constructing a petroleum product pipeline and battling complex land laws in the process are definitely formidable challenges, both in terms of cost and time. OMCs together account for 92% of petroleum product pipelines, 91% of marketing depots and 90% of retail fuel outlets. BPCL alone accounts for 20% of petroleum product pipelines, 25% of marketing depots and 23% of retail fuel outlets; thus, providing a lucrative entry point for a prospective buyer.

2019 compared to corresponding previous year period. This included subsidy from the government of Rs 56.58 crore down 77% on a y-o-y basis. Excluding compensation from the government sales of the company fell 11% to Rs 64232.92 crore....

We believe that the current valuation multiples (8.7x EV/e FY22) are already pricing in a full privatisation scenario for BPCL. Only potential improvement in earnings and cash flows can drive re-rating of stock. But this will obviously be realized with a lag and is contingent upon the private player's ability to bring about efficiencies. Our SOTP target is Rs 451/sh (5.5x Sep-21E EV/e for standalone refining, 6.0x Sep-21E EV/e for marketing and pipeline business and Rs 139/sh for other investments). Maintain SELL. Owing to a subdued refining performance in Q2, BPCL failed to impress us yet again. Moreover, BPCLs core EBITDA (adjusted for inventory and forex gains/losses) growth will lag peers over FY20-22 in the absence of refinery expansion.