X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Chennai Petroleum: Higher GRMs and volumes propel topline - Views on News from Equitymaster
MidCapSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  
  • Home
  • Outlook Arena
  • May 26, 2011 - Chennai Petroleum: Higher GRMs and volumes propel topline

Chennai Petroleum: Higher GRMs and volumes propel topline
May 26, 2011

Chennai Petroleum announced the fourth quarter results for financial year 2010-2011 (4QFY11). The company reported 88% YoY growth in sales and a positive net profit margin of 3% for the quarter.

Performance summary
  • Topline grows by 89% YoY during the quarter. For FY11, the topline registered a growth of 32.6% YoY.
  • The gross refining margins (GRMs) for the quarter came at US$ 8.29 per barrel, up 94% YoY. The GRMs (net of under recoveries) for FY11 came at US$ 5.02 per barrel, up 5.7% YoY.
  • EBITDA registered a 67% growth (QoQ) for the quarter, with margins at 5.6% as compared to operating loss last year. For FY11, EBITDA was up 43% YoY, with a 0.3% YoY improvement in margins.
  • Bottom line registered a 103% QoQ increase versus a negative net profit last year. For FY11, the bottomline registered a decline of 15%, contracting net profit margins to 1.5% for FY11 from 2.4% (YoY).
  • The company board has recommended a dividend at 120% of paid up equity capital of the company. This implies a dividend of Rs 12 per share and 5.3% dividend yield at a current stock price of Rs 226.


(Rs m) 4QFY10 4QFY11 Change FY10 FY11 Change
Net sales 54,653 103,103 88.7% 249,726 331,078 32.6%
Expenditure 55,221 97,291 76.2% 241,195 318,914 32.2%
Operating profit (EBDITA) -568 5,813 na 8,532 12,164 42.6%
EBDITA margin (%) -1.0% 5.6%   3.4% 3.7%  
Other income 690 988 43.1% 2,351 1,160 -50.7%
Interest 425 1,183 178.4% 1,374 2,545 85.2%
Depreciation 644 938 45.6% 2,671 3,145 17.7%
Profit before tax (947) 4,679 na 6,838 7,635 11.7%
Tax (336) 1,538 na 805 2,520 212.9%
Profit after tax/(loss) (611) 3,141 na 6,032 5,115 -15.2%
Net profit margin (%) na 3.0%   2.4% 1.5%  
No. of shares (m)         149  
Diluted earnings per share (Rs)*         34.4  
Price to earnings ratio (x)*         6.6  
*on the basis of trailing 12 months earnings

What has driven performance in 4QFY11?
  • The sales registered an increase both for the quarter and full year on account of higher throughputs and increase in GRMs. Topline was up 89% YoY during the quarter as throughput increased to 2.84 million metric tonnes (MMT), up 52% YoY. For FY11, the topline was up 32.6% YoY on account of the highest ever throughput of 10.73 MMT versus 10.06 MMT last year (up 7% YoY). The company has also come up with the production at 866 thousand metric tonnes (TMT), the highest for any year till date. During the year, the market sales of products came at 428 TMT, valued at Rs 17.7 bn, up 12.7% YoY. The company also achieved exports of 716 MMT of products during the year, valued at Rs 32 bn.

  • EBITDA registered a 67% growth (QoQ) for the quarter, with margins at 5.6% as compared to an operating loss last year. This is mainly due to raw material costs that declined 3.4% YoY (as a % of sales). Other expenditure and staff costs also declined by 9% YoY and 43% YoY. For FY11, EBITDA was up 43% YoY, with a 0.3% YoY improvement in margins. The raw material costs were up 0.5% YoY (as a % of sales). On the other hand, staff costs and other expenditure declined by 0.4% YoY each (as a % of sales).

  • Bottom line registered a 103% QoQ increase (versus a loss last year) translating to a net margin of 3.0%.The interest costs soared up by 178% YoY during the quarter. For FY11, the bottomline registered a decline of 15%, contracting net profit margins to 1.5% for FY11 from 2.4% (YoY).

    Cost break up
    (Rs m) 4QFY10 4QFY11 Change FY10 FY11 Change
    Raw materials 52,206 94,952 81.9% 233,412 311,210 33.3%
    % sales 95.5% 92.1%   93.5% 94.0%
    Staff cost 1,179 670 -43.2% 2,723 2,402 -11.8%
    % sales 2.2% 0.6%   1.1% 0.7%
    Other expenditure 1,836 1,670 -9.0% 5,059 5,302 4.8%
    % sales 3.4% 1.6%   2.0% 1.6%
    Total cost 55,221 97,291 76.2% 241,195 318,914 32.2%
    % sales 101.0% 94.4%   96.6% 96.3%  

What to expect?
The management has suggested a capex to the tune of Rs 13 bn for FY12. The major projects include revamp of existing crude distillation unit/vaccum distillation unit - II from 3.7 to 4.3 mmtpa. The estimated cost of the project is Rs 3 bn and is expected to be commissioned by 4QFY13.The company plans to replace existing 30" crude oil pipeline with a new 42" pipeline from Chennai port to Manali refinery at a cost of Rs 1.3 bn. The project is estimated to take 18 months from the date it is started. The long term capex plans include improvement in the distillate yield of Manali refinery which is estimated to be completed in 33 months from the date the company gets environmental clearance at a cost of Rs 31 bn.

The stock is currently trading at a price of Rs 226 which works out to a trailing 12-months earnings multiple of 6.7 times. The company has shown a decent recovery in GRMs during the quarter. However, we believe pure refining stocks are a risky bet over the long term as they have very little control over their fortunes and are excessively dependent on the swings of GRMs worldwide. However, considering that the company failed to display the intended performance over our investment horizon of 2-3 years we discontinue our coverage on the stock.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

CHENNAI PETROLEUM SHARE PRICE


Feb 22, 2018 09:13 AM

TRACK CHENNAI PETROLEUM

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

MORE ON CHENNAI PETROLEUM

CHENNAI PETROLEUM - BPCL COMPARISON

COMPARE CHENNAI PETROLEUM WITH

MARKET STATS