Chennai Petro: Takes a beating - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Chennai Petro: Takes a beating

Mar 26, 2002

The south India based pure refinery, Chennai Petroleum Corporation Ltd. (CPCL), which was acquired by Indian Oil (IOC) towards the end of the previous fiscal, continues to experience a difficult market environment. Sales of the company have declined in all the three quarters of the fiscal.

(Rs m)3QFY013QFY02Change9mFY019mFY02Change
Net sales 19,483 15,571 -20.1% 51,020 45,405 -11.0%
Other Income 110 60 -45.8% 157 150 -4.3%
Expenditure 18,155 14,720 -18.9% 48,212 44,004 -8.7%
Operating Profit (EBDIT) 1,328 851 -35.9% 2,808 1,401 -50.1%
Operating Profit Margin (%)6.8%5.5% 5.5%3.1% 
Interest 360 313 -13.3% 996 945 -5.1%
Depreciation 224 249 10.8% 765 745 -2.6%
Profit before Tax853349-59.0%1,205 (139) 
Tax 256 -   361 19-94.7%
Profit after Tax/(Loss) 597 349 -41.5% 843 (158) 
Net profit margin (%)3.1%2.2% 1.7%-0.3% 
No. of Shares 149.0 149.0   149.0 149.0  
Diluted earnings per share*16.09.4 7.5 (1.4) 
P/E Ratio  3.5     
(*annualised)      

The situation on the topline does not seem to be improving. In fact, it has deteriorated for the quarter ended December '01. Sales for the quarter have fallen by 20%, as compared to a 5% slide in the first two quarters. The performance, though, is in line with peer performance. The lower sales are due to poor offtake of petroleum products. Diesel and kerosene, which are the largest constituents in petroleum demand, registered negative growth in consumption. Also, petroleum product prices came under pressure during the third quarter, which impacted realisations. The lower net sales is also due to higher effective excise duty.

While topline declined, operating profits of the company have bounced back. In 2QFY02, the company had reported an operating loss. Operating margins for the December '01 quarter are the highest in the current fiscal. With crude oil prices declining by an estimated 28% YoY, the company is likely to have received some breathing space. Raw material costs are down by 17% and 10% for the quarter and 9 months ended December '01. The lower costs are also due to reduced throughput. During the quarter, gross refining margins are likely to be under pressure, as petroleum product prices have declined at a faster clip compared to crude oil.

With the IOC merger, working capital cycle could have tightened leading to lower short-term borrowings. Interest expense has declined for the past two quarters. Lower depreciation for the year is due to the jump in depreciation charges in the previous fiscal. Most refining companies set up their diesel hydro-desulphurisation plant over FY00 resulting in a higher charge during FY01.

At Rs 33 the scrip is trading on a multiple of 3.5x 3QFY02 annualised earnings. Over the past few weeks, the scrip has been shooting up. With BPCL announcing informal talks to merge its subsidiary, Kochi Refineries Ltd. (KRL), IOC too is contemplating merging its subsidiaries CPCL and Bongaigaon Refinery & Petrochemicals Ltd. (BRPL). The book value of CPCL at end of FY01 was Rs 83 per share. The significant discount to book value has triggered buying, as the merger ratio is likely to be in favour of CPCL. BRPL has a book value of Rs 28.

Equitymaster requests your view! Post a comment on "Chennai Petro: Takes a beating". Click here!

  

More Views on News

5 Green Energy Stocks to Watch as India Readies for a Revolution (Views On News)

Oct 13, 2021

The excitement around green energy stocks has opened up a huge contrarian opportunity in the traditional energy space.

Top Performing PSU Stocks over the Past One Year (Views On News)

Oct 1, 2021

After a decade of underperformance, PSU stocks have woken up. Here are the best performing PSUs of past twelve months.

Linde India Shares Hits New High. Up 230%+ in One Year (Views On News)

Aug 26, 2021

Linde India shares have surged sharply in the past few trading sessions. What's causing the rally?

ONGC Logs Massive Jump in Net Profit as Crude Oil Prices Double (Views On News)

Aug 16, 2021

Rising crude oil prices compensate ONGC's fall in production.

HPCL Shares Under Pressure After Profit Declines in June Quarter (Views On News)

Aug 5, 2021

Rising crude oil prices and forex woes weigh on HPCL's quarterly numbers.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

How to Hit Rs 100 Crore Wealth in Your Lifetime (Equitymaster Wealth)

Nov 15, 2021

This is how you can achieve the ambitious goal of a net worth of Rs 100 crore.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

TRACK KOCHI REFINERIES

  • Track your investment in KOCHI REFINERIES with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MARKET STATS