Hold BPCL, target price Rs 361: ICICI Securities
ICICI Securities expects BPCL’s first quarter of FY21E EPS to be up 122 per cent year on year.
ICICI Securities has given a hold rating to Bharat Petroleum Corporation (BPCL) with a target price of Rs 361.
BPCL was in the red both on a consolidated and standalone basis in Q4FY20 and its FY20 consolidated and standalone recurring EPS is down 51-55 per cent year on year, both hit by inventory loss, according to the brokerage.
ICICI Securities expects BPCL’s first quarter of FY21E EPS to be up 122 per cent year on year, despite steep fall in throughput and sales volumes due to lockdown, boosted by record auto fuel marketing margins, higher GRM and inventory gain year on year. However, net marketing margin has turned negative (may remain so unless price hikes are made) and GRM has turned very weak, but large inventory gain in FY21E appears imminent. The brokerage says upside is likely if privatisation goes through.
Investment Rationale
According to the brokerage, Q1FY21E earnings outlook is good, but outlook for the rest of FY21 would depend on whether adequate retail price hike is made and GRM recovers. The brokerage remains optimistic on retail price hikes as auto fuel marketing margins being at healthy level is crucial for success of BPCL’s privatisation (last date for expression of interest for buying GoI’s stake in BPCL is 31-Jul’20).
Downside to FY21E core GRM of $4.5/bbl is not ruled out, but that including inventory gain is expected to be in line with brokerage estimate, or higher. Target price remains unchanged at Rs 361 (4 per cent upside). The brokerage retains hold rating until clarity emerges on retail price hikes, GRM outlook and on how privatisation pans out.
Financials
For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 74959.18 crore, up 16.60 per cent from last quarter sales of Rs 64289.50 crore and down -5.95 per cent from last year's same quarter sales of Rs 79698.52 crore. The company reported net profit after tax of Rs 1616.49 crore in the latest quarter.
Promoter/FII Holdings
Promoters held 52.98 per cent stake in the company as of March 31, 2020, while FIIs held 12.28 per cent, DIIs 20.47 per cent and public and other 14.27 per cent.
BPCL was in the red both on a consolidated and standalone basis in Q4FY20 and its FY20 consolidated and standalone recurring EPS is down 51-55 per cent year on year, both hit by inventory loss, according to the brokerage.
ICICI Securities expects BPCL’s first quarter of FY21E EPS to be up 122 per cent year on year, despite steep fall in throughput and sales volumes due to lockdown, boosted by record auto fuel marketing margins, higher GRM and inventory gain year on year. However, net marketing margin has turned negative (may remain so unless price hikes are made) and GRM has turned very weak, but large inventory gain in FY21E appears imminent. The brokerage says upside is likely if privatisation goes through.
Investment Rationale
According to the brokerage, Q1FY21E earnings outlook is good, but outlook for the rest of FY21 would depend on whether adequate retail price hike is made and GRM recovers. The brokerage remains optimistic on retail price hikes as auto fuel marketing margins being at healthy level is crucial for success of BPCL’s privatisation (last date for expression of interest for buying GoI’s stake in BPCL is 31-Jul’20).
Downside to FY21E core GRM of $4.5/bbl is not ruled out, but that including inventory gain is expected to be in line with brokerage estimate, or higher. Target price remains unchanged at Rs 361 (4 per cent upside). The brokerage retains hold rating until clarity emerges on retail price hikes, GRM outlook and on how privatisation pans out.
Financials
For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 74959.18 crore, up 16.60 per cent from last quarter sales of Rs 64289.50 crore and down -5.95 per cent from last year's same quarter sales of Rs 79698.52 crore. The company reported net profit after tax of Rs 1616.49 crore in the latest quarter.
Promoter/FII Holdings
Promoters held 52.98 per cent stake in the company as of March 31, 2020, while FIIs held 12.28 per cent, DIIs 20.47 per cent and public and other 14.27 per cent.