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* BPCL posted GRM of USD12.6/bbl in 1QFY24, below our estimate of USD16.5/bbl, while implied marketing margin at INR9.3/lit came in line with our estimate.

* Refining throughput stood at 10.4mmt (vs. 10.6mmt in 4QFY23), with the share of high sulphur crude processed increasing to 76% in 1QFY24 (vs. 73% in 4QFY23). The management highlighted that GRM of the Mumbai refinery is relatively lower than that of other refineries since it cannot process more than 20% of Russian crude in its crude basket.

* Singapore GRM has improved to USD5.7/bbl in 2QFY24 TD from USD4/bbl in 1QFY24, which may lead to improvement in refining performance in 2Q. However, a decline in Russian crude oil discounts may weigh negatively. * Marketing sales volume (excluding exports) came in at 12.8mmt in 1QFY24 (vs. 12.9mmt in 4QFY23). The company intends to add 1,000 retail outlets in FY24 and has already added 111 retail outlets in 1QFY24.

* OMCs are estimated to be generating healthy marketing margins of INR11.9/INR13 on petrol/diesel in 2QFY24 TD; however, margins may be affected by retail fuel price cuts in the wake of upcoming elections and/or a rise in crude oil prices due to quota management by OPEC+ nations. The next OPEC+ meeting is scheduled to be held on 3rd Aug’23.

* There is no update on the divestment roadmap for BPCL now. The stock is trading at 1.3x FY24E P/BV, and we value it at 1.2x FY25E P/BV to arrive at our TP of INR390. Maintain Neutral.

Throughput and marketing sales volumes in line

Should outperform peers, on 7% SSG; maintains target of 40-45 additions in FY24 WLDL reported 14% revenue growth in Q1, led by 7% SSG, with the remaining through new store additions. Despite the weak consumption trends, WESTLIFE expects to continue outperforming on the back of strengthening of meals (Chicken/Gourmet/Extravalue-meal at Rs179), new product innovation, and omni-channel investments. For the medium term, WESTLIFE maintained its outlook of a high-single-digit SSG. Among channels, ‘on-premise’ grew faster at 18% in Q1 vs. 9% growth for the ‘off-premise’ channel, leading to a 200bps increase of ‘on-premise’ in the mix to 60%. WLDL added 4 stores in Q1, and reiterated its expectation of 40-45 store adds in FY24. WLDL targets expanding its network to 580-630 stores by FY28 (CY27), which implies annual addition of 45-60 stores beyond FY24. McCafé’s/EOTF’s penetration further improved to 87%/72% of its network as of Q1FY24-end vs. 81%/40% as of Q1FY23-end. EBITDA margin was flat at 13%, led by offset of 240bps gross-margin gains with 110bps/130bps higher employee/G&A costs. WLDL expects G&A cost to have normalized and operating leverage to kick-in from here on, adjusted for normal inflation.

Earnings-call KTAs: 1) WESTIFE plugged a key price-gap in its meal portfolio with launch of Mc-Saver meals at entry-level price point of Rs179, complementing its existing meal offerings of Chicken/Gourmet at the premium-end. Other new launches — ‘Piri McSpicy range’ as well as Jain friendly menu — have also seen great consumer response. 2) WESTLIFE indicated that the negative margin impact of the value-meal launch has been offset by price increases in other products. 3) WESTLIFE has not taken any incremental price hikes in Q1 and indicated that vegetable/cheese inflation has been factored in and that Company shall not see any major impact going forward. 4) WESTLIFE has partnered with Jr NTR as the brand ambassador for Chicken, in line with its longterm vision for the chicken category 5) Barring mall stores, WESTLIFE expects to convert all other stores to EOTF stores by 2027 (72% now). 6) WESTLIFE is not looking at smaller format stores, as the larger format allows launch of new extensions and helps cater to omni-channel requirements. 7) WLDL has indicated that it has outperformed on the delivery front due to its strong collaborative relationships with aggregators as well as good response on its own app. 8) Almost 64% of the overall business was from digital channels (global apps, self-ordering kiosks and McDelivery).

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