BPCL reported in-line core Ebitda, with inventory gains driving a massive beat to JEFe. Marketing volume development was more quickly than sector development. Marketing profitability is probably to be restored as retail value hikes continue. Borrowings dropped sharply on proceeds from Numaligarh stake sale and treasury stock sale. Dividend of Rs 58/share and low capex pleasantly shocked. We reduce FY22/23e Ebitda 8/5% privatisation is important to additional upside.
Results properly ahead of expectations: Reported Ebitda was 92% ahead driven by inventory gains. Reported PAT was drastically ahead of JEFe aided by (i) exceptional things – Rs 94-bn get on sale of stake in Numaligarh refinery offset by Rs 20-bn impairment in upstream organization and Rs 4-bn ESOP connected expense and (ii) deferred tax create-back of Rs 17 bn.
Core refining ahead: Core GRM of $2.5 was ahead of JEFe ($1.8). Inventory get of $4.2 was substantially greater than JEFe ($2). Refinery throughput declined 17% y-o-y in FY21 but was flat y-o-y in Q4FY21.
Marketing aided by inventory gains: Marketing Ebitda was aided by inventory gains of Rs 18.3 bn. Marketing volume was up +4.1% y-o-y against +2.5% for sector in Q4FY21. Gasoline and diesel industry shares had been -10bps and +30bps y-o-y.
SGP GRM outlook mixed: Trafigura, in its current Jef U interaction, indicated it expects gasoline spreads to strengthen additional on greater than typical demand throughout the US driving season in June-July. Naphtha really should also stay powerful on downstream demand. But the outlook on diesel is mixed with continued restrictions in India and weakness in international aviation fuel demand.
Retail value revisions have some way to go: Retail rates of gasoline and diesel have enhanced by Rs 3-4/lt due to the fact the elections ended. At the present crude value, our calculations recommend additional retail value hikes of Rs 1-5/lt in diesel and gasoline are necessary to restore typical margins.
Borrowings sharply down y-o-y: Borrowings fell Rs 155 bn y-o-y in FY21 on the back of (i) Rs 57-bn reduction in government receivables (ii) Rs 80-bn net inflow from sale of stake in Numaligarh refinery and (iii) Rs 55 bn from sale of treasury stock. Borrowings will boost to spend dividend (Rs 121 bn) and obtain of Bina refinery stake (Rs 24 bn) in FY22e. Cash & equivalents at Rs 80 bn and reduce capex intensity in the run-up to privatisation really should hold borrowings in verify.
Treasury stock and Numaligarh proceeds paid as dividend privatisation is important: We have reduce advertising volumes 9%/ 8% for FY22/23e to element in the Covid-connected restrictions. We have reduce FY22/23e Ebitda 8%/5% but EPS rises as the business shifts to a reduce tax regime. It announced a dividend of Rs 58/share. Lack of pricing freedom throughout the election clouds the outlook on BPCL’s privatisation, in our view. We favor HPCL more than BPCL on favourable valuation but preserve Buy on BPCL with a slightly greater PT of Rs 520 (from Rs 500) helped by a roll-more than to FY23e.