MOSL: BPCL (Buy) - EBITDA above estimate; core GRM at USD5.57/bbl

BPCL: EBITDA above estimate; core GRM at USD5.57/bbl

(BPCL IN, Mkt Cap USD11.8b, CMP INR405, TP INR568, 40% Upside, Buy)

BPCL reported EBITDA of INR37b (+68% YoY, +17% QoQ), higher than our estimate of INR32.1b. EBITDA adjusted for inventory gains stood at INR33b (est. of INR26b; +42% YoY, +106% QoQ), led by a better core operating performance. PAT increased 45% YoY and 25% QoQ to INR27b (est. of INR16.5b), benefiting from higher other income of INR8.3b (est. of INR2.4b; +26% YoY, +15% QoQ) and a lower tax rate of 25.6% (est. of 33.3%; 29.4% in 3QFY18, 16.4% in 4QFY17).

•  Core GRM of USD5.57/bbl was slightly higher than our estimate of USD5.37/bbl (USD5.85/bbl in 4QFY17 and USD4.9/bbl in 3QFY18). Inventory gain in the refining segment stood at INR3.5b (USD0.94/bbl) and in the marketing segment at INR1b. Kochi refinery reported a core GRM of meager 4.96/bbl, suggesting that expansion there is yet to stabilize.
• Domestic sales volume grew 16% YoY (+1% QoQ) to 10.7mmt in 4QFY18. Throughput in 4QFY18 stood at 7.9mmt v/s 6.02mmt in 4QFY17 and 7.27mmt in 3QFY18. Implied gross marketing margin, including inventory gain, improved 9% YoY and 24% QoQ to INR4.6/lit.
• For FY18, EBITDA grew 10% YoY to INR152b and PAT grew 3% YoY to INR98b. Core GRM stood at ~USD6/bbl, and refinery throughput grew 12% YoY to 28.5mmt. Domestic market sales grew 9% YoY to 41mmt.
• Management recommended a final dividend of INR7/share, addition to an interim dividend of INR14/share.