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Strong performance to sustain going forward

Our View

BPCL’s 1QFY24 reported Net revenue at Rs 1,129bn (-7% YoY; -4% QoQ), Ebitda stood at Rs 158bn (+42% QoQ), GRM at USD 12.64/bbl as against USD 27.5/bbl in June 2023, resulted from sharp correction of fuel cracks & on account of high supplies. Russian crude discount has narrowed. Mozambique project to start over next 2 quarters. Petrol sales expected to continue to grow at 6%, HSD to see weakness on account of demand shift towards CNG. Capex guidance of Rs. 1.5tn for next 5 years, of which Rs 100bn expected to incur in FY25, major amount of capex towards FY26. Energy transition towards CNG, securitization of supplies to meet domestic demand and to reach net zero have signed wind power projects and MOUs. We maintain ADD with a TP of Rs 430/sh.

Result Highlights

* Profitability: The Ebitda and PAT for the quarter stood at Rs 159bn (+42% QoQ) and Rs 105.5bn (+63% QoQ).

* Refinery Utilization: The refining throughput stood YoY & QoQ higher at 10.4mmt (+7% YoY; -3% QoQ), implying a utilization of 117%. Distillate yield was 84.09% for the quarter.

* Gross Refinery Margin: GRM for BPCL stood at USD 12.6/bbl,(-52% YoY, -39% QoQ), where GRM for MR stood at USD 6.5/bbl, for KR stood at 15.5/bbl and for BR at USD 26.1/bbl. Russian crude discount narrowed sharply leading to normalization of margins.

* Marketing sales: Total Domestic products sales stood at 12.75mmt (+8% YoY; - 1% QoQ during the quarter. MS sales stood at 2.5mmt (+6% YoY and QoQ) expected to grow at current rate and HSD sales at 6.01mmt (+6% YoY & +1% QoQ) expect softening in demand due to transition to CNG, ATF sales rose by 14% YoY.

* Marketing margins: As per our assessment, the retail marketing margin during the quarter stood at Rs 10,663/t. The marketing losses of previous year not yet fully recovered.

Valuation

We maintain our ADD rating on BPCL with TP of Rs 430/sh, as fundamentals remains intact for future growth prospectus. We value BPCL on SOTP basis, with an equity value of Rs 403/sh for the standalone business (incl. listed & unlisted current investments) and Rs 27/sh towards upstream investments. AT CMP BPCL is trading at a P/BV of 1.4x and P/E of 7.4x FY25e

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