Add BPCL Ltd for the Target Rs. 350 by Emkay Global Financial Services Ltd
BPCL’s Q4FY26 SA adjusted EBITDA/APAT of Rs91.0/50.3bn beat our estimates by 29%/41%, largely driven by better marketing margins (lag effect) and inventory gains, though lagged peers due to a lower inventory cycle. Reported GRM of USD18/bbl was slightly below our USD19/bbl estimate, but blended marketing margin of Rs4.2/kg was a 61% beat. Despite supply disruptions, BPCL maintained adequate crude sourcing through a diversified mix, with supplies secured until Jul-26. Spot sourcing rose to 50–55% from 45%, while Russian crude share increased to 40–42% from 25% in Q3, with Russian grades currently trading at a premium. Q1FY27 is expected to be challenging amid elevated crude prices, spot premiums (USD10-12/bbl), and higher freight. BPCL booked Rs19.0bn of LPG subsidy and recorded impairment of Rs43.5bn in Brazil upstream. LPG under-recoveries rose to Rs13.4bn in Q4 from Rs4.7bn QoQ, with current under-recoveries at Rs670/cylinder. Apr-26 MS/HSD market share stood at 30%/29.6%; BPCL is targeting ~32%. First cargo from Mozambique is expected by mid-CY28, with no additional equity requirement anticipated. We largely retain FY27-28E EBITDA; Retain ADD and TP of Rs350.
Results highlights
BPCL’s refining volumes declined 2% YoY to 10.4mmt (2% miss), with overall utilization at 119%. Distillate yield was largely steady at 84%. Domestic sales volume rose 3.3% YoY to 13.9mmt vs industry growth of 2.7% YoY, with overall volume up 4% YoY to 14.2mmt (2% miss). Exports fell 8% QoQ to 0.35mmt. Petrol/diesel sales volume rose 6.7%/2.2% YoY vs industry growth of 6.7%/5.3% YoY, thereby implying market share loss in diesel. ATF sales rose 29% YoY/5% QoQ, while LPG was down 2% YoY. Total opex rose 36% YoY/39% QoQ to Rs108.0bn (3% above estimate). Finance costs rose 33% QoQ to Rs4.8bn, while net cash was at Rs87.3bn vs Rs39.6bn in Q2FY26-end. D/A rose 3% QoQ to Rs20.4bn, while other income of Rs10.6bn was a 28% beat (up 34% YoY/42% QoQ). Q4/FY26 capex stood at Rs86/204bn
Management KTAs
Amid supply disruptions, term crude share declined to 45% from 55%, increasing reliance on spot cargoes, with Russian crude share rising from 25% in Q3 to 31% in Q4. BPCL maintained industry-leading RO throughput at 143kl/month in Q4. Crude premiums peaked at USD20–25/bbl from USD4–5/bbl and are at USD10–12/bbl. Bina expansion achieved 23% progress vs 32% planned, impacted by geopolitical and supply chain disruptions. No major cost escalation is expected in ongoing projects. FY27 capex target stands at Rs250bn, while LPG/crude/product inventory is maintained at 15–20/25–27/25 days. Mozambique has achieved 42% completion with no further equity requirement.
Valuation
We value BPCL on SOTP-EV/EBITDA-based methodology, with investments at 30% holdco discount. We retain our blended target EV/EBITDA of 5.7x. Key risks: Adverse pricing and downstream margins, currency movement, GoI policies, and project issues.
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