Stay Neutral On BPCL Shares Maintains Motilal Oswal Post Strong Q2, Says Capex Cycle Clarity Key To Re-Rating

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Motilal Oswal Report

Bharat Petroleum Corporation Ltd.’s gross refining margins have been at a premium to SG GRMs due to the continuous optimization of refinery production, product distribution, and crude procurement.

The use of advanced processing capabilities of Bina and Kochi refineries allows BPCL to process 100% of high-sulfur crude and 50% of Russian crude.

We maintain our GRM assumptions. Current marketing margins remain healthy, above the Rs 3.5/lit we are building in for motor spirit/high speed diesel.

While valuation appears reasonable and strong marketing performance continues, a muted medium-term refining outlook (our FY27/FY28 PAT estimates are 9%/11% sensitive to every USD1/bbl change in GRM) and the commencement of a new capex cycle emerge as key concerns.

Hence, we reiterate our Neutral rating with an SoTP-based valuation of Rs 340/share.

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