MOSL: BPCL (Downgrade to Neutral)-Adjusted EBITDA in line-GRM marginally above estimate

​BPCL: Adjusted EBITDA in line; GRM marginally above estimate

(BPCL IN, Mkt Cap USD7.2b, CMP INR738, TP INR779, 7% Upside, Downgrade to Neutral)

• BPCL reported EBITDA of INR22.1b (in-line; -39% YoY, -36% QoQ) for 4QFY17. Adjusted EBITDA also stood at INR22.1b, with one-time expense of INR4b for gratuity and marketing inventory gain of INR4b. Other income was higher at INR6.6b (+207% YoY, +65% QoQ; our estimate was INR5.8b) due to higher dividend income. Lower effective tax rate of 16.4% resulted in higher than estimated PAT of INR18.4b (-13% YoY, -19% QoQ; our estimate was INR14.5b).
  
• For the full year, standalone EBITDA declined 4% to INR111b due to lower marketing margin and lower GRM, despite inventory gain. Standalone PAT grew 14% to INR80.4b despite lower EBITDA due to higher other income and lower effective tax rate. Consolidated EBITDA declined 5% to INR135b while PAT grew 6% to INR95b due to lower interest cost.
  
• GRM at USD6/bbl was marginally higher than our estimate of USD5.5/bbl. GRM was USD5.9/bbl in 3QFY17 and USD6.3/bbl in 4QFY16. For FY17, GRM was USD5.3/bbl, lower than USD6.6/bbl in FY16.
  
• Domestic sales volume declined 5% YoY and QoQ to 9.3mmt in 4QFY17. For the full year, sales volume grew 3% to 37.7mmt. Throughput in 4QFY17 was 6mmt v/s 6.8mmt in 3QFY17 and 6.2mmt in 4QFY16. In FY17, throughput grew 5% to 25.4mmt.