MOSL: BPCL (Buy)-EBITDA significantly below estimate-core GRM at USD6.5/bbl
​BPCL: EBITDA significantly below estimate; core GRM at USD6.5/bbl
(BPCL IN, Mkt Cap USD15.8b, CMP INR513, TP INR643, 25% Upside, Buy)
- BPCL's reported EBITDA of INR35.3b (+158% YoY, +188% QoQ) was significantly lower than our estimate of INR55.8b, led by lower GRM and inventory gains during the quarter. EBITDA adjusted for inventory gains stood at INR28.4b (+64% YoY, +45% QoQ), below our estimate of INR35.8b, led by lower core GRM (USD6.5/bbl, significantly below benchmark SG GRM of USD8.3/bbl and our est. of USD8.5/bbl; USD6.9/bbl in 1QFY18, USD3.8/bbl in 2QFY17). The company reported total inventory gain of INR6.84b for the quarter - inventory gain in the refining segment stood at ~INR5b (~USD1.47/bbl) and in the marketing segment at INR1.85b. PAT stood at INR23.6b (est. of INR39b; +81% YoY, +217% QoQ), benefiting from higher other income of INR8b (est. of INR5.8b; -23% YoY, +22% QoQ).
- Core GRM of USD6.5/bbl was significantly lower than our estimate of USD8.5/bbl. Sub-optimal GRM can be attributed to the ongoing integration of IREP. Core GRM from the Mumbai refinery stood at USD6.87/bbl and from the Kochi refinery at USD6.09/bbl. We expect GRM to improve post stabilization of the Kochi refinery.
- Domestic sales volume grew 10% YoY (-2% QoQ) to 9.8mmt in 2QFY18. Throughput in 2QFY18 grew by 10% YoY (+9% QoQ) to 7mmt, led by Kochi expansion.
Bharat Petroleum refines crude oil and markets petroleum products in India. Co. offers fuels and services, as well as lubricants, including automotive engine oils, gear oils, transmission oils, specialty oils, and greases; and liquid and gaseous fuels, illuminating oils, and other products from crude petroleum or bituminous minerals. Co. is engaged in the retailing of petrol, diesel, and kerosene. Co. also imports and exports fuel oil, naphtha, and base oil. Co. serves household and automobile sectors; public and private sectors; and various government establishments, such as defense, railways, state trading corporations, state electricity boards.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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