BPCL Q4 Results Review - Net Profit Lower Due To Refining Miss: Nirmal Bang

Nirmal Bang Report

Bharat Petroleum Corporation Ltd.’s Q4 FY24 standalone profit after tax missed our estimate by 6.9%; but beat the street by 12.7%. This was driven by the 13.7% miss on Ebitda due to lower marketing Ebitda (Rs 25.83 billion versus Rs 36.54 billion as per our estimate), and 3.6% miss in gross refining margin reported at $12.48/bbl.

Bina/Kochi GRMs saw a miss of 1.4%/4.8%, whereas Mumbai GRMs was in line. BPCL also reported Marketing inventory loss of Rs 7.65 billion. The PAT miss was also due to a 13.2% miss in other income/higher other expenses by 14.4%.

We have cut the estimates for FY25E by 18.8% due to a cut in GRM/retail margin; but raised FY26E by 11% based on raised retail margin that offsets the cut in GRM. We have also rolled over to FY26E.

We have raised target price by 16.4% to Rs 605 after rolling over to revised FY26E, and higher target PE of 7.2 times on FY26E versus old PE of 6.5 times. The target PE is based on the average PE over FY13-17 when the stock gave 36% CAGR, based on Earnings CAGR of 35%,~ a 24% discount to FY10-20 average PE.

The 10% rerating is based on potential upside to long term earnings/cashflows from investments on CGD projects (could add to earnings by FY27E (awaiting clarity from BPCL), refinery capacity augmentation and non-fuel retailing.

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