Reduce Bharat Petroleum Corporation Ltd For Target Rs. 267 By PL Capital
Strong GRM drives earnings
Quick Pointers:
* Under-recovery of Rs32bn on the sale of LPG in Q4FY25. The company has a negative buffer of Rs104.5bn as on 31st March, 2025
* Marketing inventory gain for Q4FY25 at Rs5.23bn
Bharat Petroleum Corporation (BPCL) reported better-than-expected Q4FY25 results with EBITDA of Rs77.6bn (up 2.4% QoQ, PLe: Rs35.7bn, BBGe: Rs57.9bn). Adj PAT came in at Rs45.5bn (down 2.1% QoQ, PLe: Rs14.1bn, BBGe: Rs25.2bn). The company reported an exceptional item of Rs17.7bn due to impairment loss in its WOS subsidiary BPRL. GRM stood at US$9.2/bbl while GMM as per our calculation came in at Rs5.9/ltr. While GMM on petrol/diesel has risen to Rs12.3/9.7/ltr in Q1FY26-TD, average Singapore GRM continues to remain weak at ~US$3/bbl, and with the steep decline in crude oil prices we expect the company to report inventory losses. The company expects LPG under-recoveries to persist at RS170/cyl. We thus build in GRM of US$7.6/bbl (factoring in better configuration of Bina refinery) in FY26/27 and marketing margin of Rs4.8/4.1/ltr for FY26/27. The stock is currently trading at 1.5/1.4x of FY26/27 P/BV. We maintain REDUCE rating with a TP of Rs267 based on 1.2x FY27 P/BV.
* Operating performance beats estimates: Operating profit at Rs77.6bn grew 2.4% QoQ (PLe: Rs35.7bn). Adj PAT came in at Rs45.5bn, down 2.1% QoQ. On a YoY basis, EBITDA/PAT fell by 15.7%/18.3%.
* Refining margins at US$9.2/bbl: Refining throughput stood at 10.6mmt, up 3.2% QoQ. Reported GRM came in at US$9.2/bbl (PLe: US$5/bbl. GRM rose 64% QoQ but fell 18.3% YoY. Average Singapore GRM for Q4-TD continues to remain soft at ~US$3/bbl amid continued weakness in product cracks. While near term weakness will persist, we believe GRM s will revert to its long-term average of US$5-7/bbl in FY26/27. Going ahead, we anticipate a GRM of US$7.6/7.6/bbl for FY26/27E.
* GMM declines sequentially: Marketing sales for Q4 stood at 13.4mmt, flat QoQ. Implied GMM came in at Rs5.9/ltr (PLe: Rs3.8/ltr), down 18.3% QoQ. Marketing inventory gain was Rs5.2bn. Further, BPCL faced an under-recovery of Rs32bn on the LPG front. In the current quarter, marketing margins on petrol/diesel are averaging at Rs12.3/9.7/ltr. Accordingly, we build in a GMM of Rs4.8/4.1/ltr for FY26/27E.
* Concall Highlights: 1) Domestic petroleum products’ demand grew by 4.3% in Q4, with petrol up by 5.9%, diesel up by 1.2%, and ATF up by 6.5%. 2) Russian crude accounts for 24% with USD3/bbl discount (vs 34% in Q3). Saudi at 21% (vs 19% in Q3), Abu Dhabi-16% (vs 18% in Q3), US WTI-5% (vs 13% in Q3). 3) Approved Rs61bn on pre-project activities, including land identification, feasibility studies, and environmental assessment for Andhra refinery cum petchem project 4) Commissioned 1,805 new ROs during FY25, expanding the network to 23,642 outlets. 5) 19.37% ethanol blending achieved in Q4. 6) Capex guidance of Rs200/250/300bn for FY26/27/28.
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