BPCL: An individual story - 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?  

BPCL: An individual story

Jun 18, 2004

BPCL, the oil marketing PSU, will be heaving a sigh of relief after the government's announcement of price hikes in LPG, petrol and diesel along with excise duty cuts. It should be noted that the oil marketing companies suffered a loss to the tune of Rs 36 bn in FY04 on account of a freeze on petrol and diesel prices coupled with an under-recovery of Rs 13 bn on LPG.We had put up an article (click here to read more) on the likely impact of price hikes on the oil companies in general and now consider the impact of these price hikes with respect to BPCL.

 FY04 (MMT)FY05E (MMT)Net Increase (Rs bn)
Petrol2.5 2.6 12.0
Diesel9.9 10.3 25.8
LPG2.4 2.8 10.9
Total  48.75

The price hike shall bring in incremental revenue of Rs 48.8 bn. As per our estimates, petrol and diesel are likely to grow at 3% while LPG shall grow by 12% in terms of volumes for the industry in FY05. BPCL shall gain marginally in terms of market share and coupled with the price hike, benefit in terms of realizations.

Apart from the price hikes, it should be noted that BPCL is upgrading its capacity to 12 MMTPA (million metric tonnes per annum) from the current processing capacity of 8.7 MMTPA. This, to a large extent, shall help the company reduce its dependence on external sources (the company purchases 7 MT from other refineries) and at the same time, help the company reduce costs. The gross refinery margins are likely to remain stable, as the government has not yet declared any customs duty reductions, which play an important role in the calculations of import parity prices (basis for refinery gate prices).

At Rs 345, the stock is trading at a price to cash flow of 3.5x FY06E earnings (without price revision impact). The government has further claimed that it is in the process of finalizing a package towards the oil industry and planning to give the companies more autonomy in terms of price revisions within ‘socially acceptable' limits. To that extent, it is a positive for the sector.

However, with the history of rollbacks, we have to wait and watch as to what actually pans out in the budget for the industry. Moreover, there could be a situation the demand-supply gap (supply is already higher than demand in India now) widens forcing players to export, which is not a lucrative proposition from the margin perspective. With competition expected to increase in the retail side, there could be further squeeze on margins. To that extent, the risk profile of the stock and the sector is on the higher side.

Equitymaster requests your view! Post a comment on "BPCL: An individual story". Click here!

  

More Views on News

Surprise Profit Boosts BPCL Stock (Views On News)

May 27, 2021

BPCL shares scale fresh 52-week highs as the refiner posts a record-breaking bottomline.

BPCL Announces Quarterly Results (3QFY21); Net Profit Up 120.3% (Quarterly Result Update)

Feb 11, 2021 | Updated on Feb 11, 2021

For the quarter ended December 2020, BPCL has posted a net profit of Rs 28 bn (up 120.3% YoY). Sales on the other hand came in at Rs 866 bn (up 1.4% YoY). Read on for a complete analysis of BPCL's quarterly results.

BPCL 2019-20 Annual Report Analysis (Annual Result Update)

Oct 22, 2020 | Updated on Oct 22, 2020

Here's an analysis of the annual report of BPCL for 2019-20. It includes a full income statement, balance sheet and cash flow analysis of BPCL. Also includes updates on the valuation of BPCL.

GAIL Misses Earnings Estimates. Company Ditches Plan to Split (Views On News)

Jun 10, 2021

GAIL's earnings and proposal to monetise pipelines through InvIT route, puts stock in focus.

ONGC Hits 52-Week High: Key Triggers that Drove the Stock This Week (Views On News)

Jun 5, 2021

ONGC stock at 52-week highs amid the recent rally in crude oil prices.

More Views on News

Most Popular

Hotel Stocks Will Reward Investors (Fast Profits Daily)

Jun 8, 2021

This is why I'm bullish on the hotel and hospitality sector.

Don't Break These 5 Intraday Trading Rules (Fast Profits Daily)

Jun 1, 2021

To become a better intraday trader, follow these rules religiously.

Is the RBI's 'Bubble Talk' Signalling a Market Crash? (Profit Hunter)

May 31, 2021

Is the Indian central bank correct in warning you about a market crash?

Rs 2 Trillion Stimulus Coming to a Stock Market Near You (Profit Hunter)

Jun 2, 2021

Get ready to profit from a massive stimulus that you've never seen before.

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

BPCL SHARE PRICE


Jun 11, 2021 (Close)

TRACK BPCL

COMPARE BPCL WITH

MARKET STATS