Report
Swarnendu Bhushan
EUR 120.00 For Business Accounts Only

MOSL: BPCL (Neutral)-A revisit to recent global acquisitions in fuel retail

BPCL: A revisit to recent global acquisitions in fuel retail

(BPCL IN, Mkt Cap USD15.7b, CMP INR519, TP INR533, 3% Upside, Neutral)

 

The possible strategic divestment of oil marketing companies (OMCs) to private parties is generally filled with fantasies of rich valuations. After all, a stake in any of the OMCs provides the buyer ready access to the third largest and one of the fastest growing petroleum markets globally. In our recent report, we analyzed various valuation methodologies for BPCL, to arrive at a target price range of INR518-593/share.

In this note, we reiterate the same and maintain neutral on the stock due to several complexities involved.

India – Third largest and one of the fastest growing petroleum markets

  • India is the third largest petroleum consumer in the world after the US and China with consumption of ~5.2kbopd.
  • During 2013-18, consumption of petroleum products in India came in at ~6.4% CAGR as against 1.6%/5.2%/-3.5% for the US/China/ Japan respectively.
  • In CY19 YTD, India witnessed growth of ~3% in consumption of petroleum products with an increase in petrol/diesel consumption at 8%/3% in CY19YTD (CAGR of 13%/4% in 2013-18).
  • India's per capita car ownership is dismally low at 22/1,000 v/s 980/1,000 for the US and 164/1,000 for China. However, rise in urbanization combined with better road connectivity is expected to result in sustained high growth of auto fuel consumption, despite the onslaught of CNG and EVs.
Underlying
Bharat Petroleum Corporation Limited

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.

Provider
Motilal Oswal
Motilal Oswal

​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.

Analysts
Swarnendu Bhushan

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