BPCL — Motilal Oswal Maintains 'Neutral' Stance On The Stock; Citing Rising Capex, Muted GRM Outlook

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Motilal Oswal Report

Bharat Petroleum Corporation Ltd.’s gross refining margins have been at a premium over Singapore GRMs due to the continuous optimization of refinery production, product distribution, and crude procurement. The use of advanced processing capabilities of the Bina and Kochi refineries allows BPCL to process 100% of high-sulfur crude and 50% of Russian crude.

We maintain our GRM and marketing margin assumptions. While the current marketing margins remain healthy and slightly above the Rs 3.3/lit level, we are modeling for motor spirit/high speed diesel. SG GRM has been marginally down so far in Q4 FY25 at $2.7/barrel of oil versus $5/bbl in Q3 FY25.

While valuation appears reasonable and strong marketing performance continues, a muted mid-term refining outlook (our FY26E/FY27E PAT are 17%/18% sensitive to every $1/bbl change in GRM) and commencement of new capex cycle emerge as key concerns. Hence, we reiterate our Neutral rating with an SoTP-based valuation of Rs 240/share.

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