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Energy: Global comparison - Views on News from Equitymaster
 
 
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  • Jan 10, 2001

    Energy: Global comparison

    British Petroleum Amoco (BPAmoco) is one of the largest integrated oil companies in the world. BP of the U.K and Amoco of the U.S merged their operations in FY99. The merged company has presence in the upstream - oil exploration and production, downstream - refining and in chemicals.

      FY00
    (Rs m) BPAmoco HPCL BPCL
    Sales 3,844,036 338,309 333,847
    Operating Profit Margin (%) 7.9% 4.7% 4.8%
    Profit after Tax/(Loss) 236,716 10,574 7,039
    Net profit margin (%) 6.2% 3.1% 2.1%
    No. of Shares (m) 3,794 339 300
    Diluted eps 62.4 31.2 23.5
    Current market price 2,237 150 130
    Market Cap (Rs bn) 8,485.5 50.9 38.9
    P/E Ratio 35.8 4.8 5.5
    Mkt cap / sales 2.2 0.2 0.1
    Price / Book value 2.5 0.8 1.0
    1USD/Rs 46    

    The profitability ratios indicate that the earnings ability of BPAmoco is almost twice that of its Indian counterparts; HPCL and BPCL. The OPM of the international major is less than double (68%) the OPM of the Indian companies. However, the NPM of BPAmoco is twice of HPCL and thrice that of BPCL.

    Consequently, one can expect the valuations of the international company to be atleast double those of the Indian counterparts due to its earnings abilility. Further, since BPAmoco is better integrated along the energy chain and is professionally managed it receives premium valuations as compared to the Indian companies. It maybe noted that HPCL and BPCL do not be receive fair valuations, which could be due to their Government lineage.

    The market cap to sales does show a wide disparity. Nevertheless, with the Indian oil companies attempting to integrate along the energy chain and the Government contemplating of divesting its majority stake these companies could see an improvement in their valuations.

     

     

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