BPCL's management expects daily auto retail fuel price revision may restart soon,

Chirag Batavia • 8 June 2020

BPCL

 BPCL’s normalized results were well above KIE's estimates in 4QFY20 led by higher realized refining and marketing margins; reported results were marred by large inventory/forex loss.

 BPCL’s normalized EBITDA, adjusted for adverse inventory/forex movement, was well above KIE's estimate at Rs.54.9 bn in Q4FY20, reflecting higher realized margins for refining and marketing segments. 

 In FY20, normalized refining margins increased modestly to USD 4.2/bbl while marketing margins increased modestly by 2% yoy. Company’s domestic volumes remained steady at 43.1 mn tons; exports increased modestly to 2.6 mn tons from 1.9 mn tons in FY10. 

 In FY20, consolidated net income was higher at Rs36.6 bn (EPS of Rs15.6), including Rs15 bn of profits from NRL and higher contribution from IGL/PLNG, which was offset by net loss of Rs8 bn reported by BORL.

 Company management expects daily auto retail fuel price revision may restart soon, once low-cost inventory gets utilized with demand reverting to normalcy (~70% currently). Capex will likely be lower around Rs. 80 bn in FY21 and propylene derivatives petchem project at Kochi is mechanically complete, although commissioning is delayed.

 KIE expects standalone EPS of Rs25.7 (-24%) in FY21 and Rs33 (-7%) in FY22 factoring in lockdown-related impact on volumes & margins and other minor changes. KIE retains BUY on the stock with a SoTP-based fair value of Rs440.

Dated: 8th June 2020
CMP: Rs.370
Fair Value: Rs.440
Potential Upside: 23.3%
Market Cap: Rs.804.78 bn
Time Frame: 12 months
Note: The above is brief note on the company, based on the inputs of KIE research report dated 5th June 2020, which is available on their website at: https://www.kotaksecurities.com/ksweb/ResearchCall/Fundamental.    
Disclaimer: http://bit.ly/2n5AxIE




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