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BPCL posted better than expected performance in Q1FY25. SA EBITDA/APAT fell 40-45% QoQ each to Rs56.5/30.1bn, but was a 19%/35% beat. Reported GRM stood at US$7.9/bbl vs our estimate of US$7.0/bbl. Implied marketing margin saw an 8% miss at ~Rs4.9/kg, but was offset by an 8% lower opex runrate and Rs4.1bn of inventory gains. LPG buffer turned negative at Rs20.2bn as of Jun-24-end vs. positive QoQ. SA net debt was near-Nil. Mgmt indicated margin comfort at US$80-85/bbl for crude, and expectation of better refining spread ahead which should support its capex program and its aim to double profit by FY30. Also, LPG compensation is awaited. We retain our positive stance on OMCs led by stable marketing outlook. We largely retain FY25-26E earnings and maintain BUY on BPCL, rolling over Sep-25E TP of Rs370/share.

Result Highlights

Refinery utilization was at ~115%, with throughput down 2% QoQ. GRM of the Mumbai/Kochi/Bina refinery was US$4.7/8.5/12.8 per bbl in Q1, declining 37% QoQ on average. Russian crude formed ~39% of BPCL’s total throughput, with discounts largely flat QoQ at US$3.5-4.0/bbl on delivered basis. Domestic sales volume rose 3.2% YoY vs. 2.5% for the industry, with overall volumes at a marginal 1% beat. Petrol/diesel sales volumes rose 6.3%/largely flat YoY vs. industry growth of 6.7%/1.4%, respectively. Opex was 8% lower than estimate, at Rs68.3bn (both, employee and other expenses coming in lower than estimate). D/A fell 2% QoQ to Rs16.8bn, as interest cost was down 15% to Rs4.4bn. Gross debt fell 19% to Rs152.1bn as of Jun-24-end.

Management KTAs

BPCL is planning to undertake 15/45 days of maintenance shutdown at its Bina/Kochi refineries during Aug-Oct ’24. Current monthly LPG under-recovery run-rate is Rs6bn at US$570/mt Aramco contract prices. The company has plans for 23k fuel ROs by FY25- end (1.3k adds) and added 171 in Q1. BPCL has selected licensors and PMCs for the two new petchem projects (Bina) with scheduled completion/commissioning by May28/FY29. BPCL’s marketing volume in FY25 is expected at 52.5mmtpa, with sourcing from outside refineries; however going ahead, shortfall could be sizable. Hence, it is evaluating more refineries (wrt the Andhra request). Under Project Aspire, BPCL plans to double its profit by FY30, from current levels of Rs120-130bn, supported by expansion projects. The Mozambique security situation is improving, whereas project cost could be revised to US$19.5bn from US$15.5bn earlier. FY25 capex target is Rs164bn, of which Rs26bn incurred in Q1FY25. Rs71/43bn would be spent on marketing-pipelines/refining

Valuation

We value BPCL on SOTP-EV/EBITDA based methodology, with investments at a 30% holdco discount. We roll over to Sep-26E, and retain our blended target EV/EBITDA at 6.0x. Key risks: Adverse commodity prices and downstream margins; currency movement; government policies; and project issues.

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