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Our View 

BPCL's Q1FY25 results exhibit a weak financial performance where the integrated margins were lower than our expectations. The EBITDA and Adj. PAT, stood at Rs 56.5bn and Rs 30.1bn, respectively. The core GRM at USD6.6/bbl was strong while and the market share in diesel and motor spirits highlight the company's operational prowess. BPCL's strategic reduction in debt, annual capex target of Rs130bn, and enhanced refining efficiency position it as a compelling investment, reflecting a positive outlook for sustained growth. We maintain our BUY rating with a 12-mth unchanged TP of Rs415. 

Result Highlights 

*  EBITDA/Adj. PAT were Rs 56.5/30.1bn is down 64.3%/71.4% YoY and 38.7%/45.9% QoQ. This is higher than our estimates and the consensus, although when we compare it on core performance its better than our estimates on refining but weaker in marketing segment.

* The reported GRM was USD7.86/bbl (MR/KR/BR USD4.66/USD8.45/USD12.76) vs USD12.48/bbl the previous quarter (MR/KR/BR USD8.97/USD12.76/USD18.72) and USD12.64/bbl a year ago (MR/KR/BR USD6.48/USD15.52/USD18.82), while the Arab heavy-light difference was USD1.5/bbl (USD1.8 the quarter prior). As per our assumptions, the core GRM was USD6.6/bbl (USD12 the previous quarter, USD12.9 a year back), a USD3.2/bbl premium to the benchmark USD3.4. The assumed refining inventory gain was USD1.26/bbl (gain of USD0.48 the prior quarter and a loss of USD0.3/bbl a year ago). Refinery throughput was 10.11mmt (MR/KR/BR 3.78/4.39/1.94) at ~115% utilisation (119% the previous quarter, ~118% a year ago).

*  The integrated core EBITDA margin was USD3/bbl vs our est of 3.7 (USD7.8 the prior quarter, USD11.8 a year ago), below expectations on poor core marketing performance.

* The core marketing EBITDA was Rs0.9/ltr (Rs3.2 in the prior quarter, Rs6.6 a year back) lower than our expectations of Rs1.5/ltr. The domestic marketing throughput was 13.2mmt, up 3.2% YoY and flat QoQ (vs. the industry’s growth of 2.5% YoY and -0.8% QoQ). MS sales were 2.7mmt, up 6.3% YoY and 4.7% QoQ, while diesel at 6.2mmt, flat YoY and up 4% QoQ. Industry motor spirit and diesel sales were up 6.7%/1.4% YoY and 6% QoQ for both. The reported marketing adventitious/inventory gain was at Rs4.07bn. BPCL’s market share of high-speed diesel and motor spirits market shares to 25.3% and 26.9% respectively.  

*  Capex as per PPAC was Rs16.1bn for Q1FY25 with target of Rs130bn for FY25. Debt at Rs152.1bn was sharply down by Rs127.3bn YoY and Rs35.6bn QoQ on stronger cashflows, lower capex and purchase of discounted crude which resulted in lowering the working capital requirements. 

Valuation 

BPCL has Rs19.9bn and Rs24.2bn sensitivity to a change of Rs0.5/ltr and USD1/bbl, respectively. An expectation of dividend of 4.3%/4.3% FY25e/26e would be key for shareholders. The BV/share for FY25e/26e is at Rs 187/199 and the debt: equity is least amongst OMCs at 0.3x for FY25e/26e. At CMP, the stock trades at 7.7x/7.5x FY25e/26e EV/EBITDA and 1.7x/1.6x P/BV (excl. investments, trades at 6.4x/6.3x FY25e/26e EV/EBITDA and 1.4x/1.3x P/BV). We maintain a BUY rating with a target price of Rs415 valuing it on a sum-of-parts basis (core business at 8x EV/EBITDA and investments at Rs64). 

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