Hold Bharat Petroleum Corporation; target of Rs 375: ICICI Direct
ICICI Direct’s research report on Bharat Petroleum Corporation
Bharat Petroleum Corporation (BPCL) reported Q4FY19 results that were above our estimates on the profitability front on account of better-than-expected performance in the marketing segment. However, reported GRMs disappointed and were at US$ 2.7/bbl below our estimate of US$ 5.2/bbl during the quarter on a weak operational performance. Core GRMs were at US$ 2.5/bbl in Q4FY19. Revenues declined 4.9% QoQ to Rs 83941.7 crore on account of lower average oil prices. On account of healthy numbers from marketing segment, EBITDA increased to Rs 4805 crore above our estimates of Rs 4225.2 crore. On the profitability front, reported PAT was at Rs 3124.9 crore above our estimate of Rs 2496.5 crore.
We are neutral on BPCL at the current juncture given the volatility in oil prices and new government’s intent to pass on costs to consumers during high oil prices. BPCL’s ability to maintain normal marketing margins and trend in refining margins will determine its near term performance. We have a HOLD recommendation on the stock with a target price of Rs 375 (based on average of P/BV multiple: Rs 289/share and P/E multiple: Rs 360/share).
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