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BPCL: Depreciation costs buoy PAT - Views on News from Equitymaster
 
 
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  • Jul 31, 2001

    BPCL: Depreciation costs buoy PAT

    Bharat Petroleum Corporation Ltd. (BPCL) seems to have succumbed to the slowdown. The turnover, YoY, has dropped in 1QFY02. Growth in the refining sector has slowed down to 6.4% in 1QFY02 from 34.5% in 1QFY01 as per Central Statistical Organisation (CSO) estimates.

    (Rs m) 1QFY01 1QFY02 Change
    Sales 108,097 101,463 -6.1%
    Other Income 340 356 4.7%
    Expenditure 103,423 96,956 -6.3%
    Operating Profit (EBDIT) 4,674 4,507 -3.6%
    Operating Profit Margin (%) 4.3% 4.4%  
    Interest 492 721 46.5%
    Depreciation 2,245 712 -68.3%
    Profit before Tax 2,277 3,430 50.6%
    Tax 401 1,201 199.5%
    Profit after Tax/(Loss) 1,876 2,229 18.8%
    Net profit margin (%) 1.7% 2.2%  
    No. of Shares (eoy) 150 300  
    Diluted Earnings per share* 25.0 29.7  
    P/E Ratio   6.3  
    *(annualised)      

    Sales have declined despite a rise in crude throughput to 2.2 MMT (m metric tonnes) from 1.7 MMT, a growth of 29.8%. Purchase for resale volumes have also increased to 5 MMT from 4.8 MMT, a growth of 3.8%. Sales increase has been seen in petrol, ATF (aviation turbine fuel), naphtha and LPG. However, sales of key middle distillates (diesel & kerosene) could have come under pressure, especially with a slowdown in the industry. Middle distillates contribute an estimated 62% to sales. Reliance Petroleum (RPL) has registered a de-growth of 4.3% in middle distillate sales for 1QFY02. The company has also clocked a drop of 16.1% in lubricants sales to 15.5 TMT (thousand metric tonnes).

    Along with a drop in sales, operating expenses have also declined, which has protected operating margins. This has also prevented a further slide in operating profits. The OPM for 1QFY02 has increased marginally by 12 basis points. The drop in operating cost is due to a 8.3% drop in purchase of products for re-sale, which constitute an estimated 65% of sales. The higher volume in purchase of products for resale but lower costs could indicate some softening in international petroleum product prices. YoY inventory has increased by Rs 30 bn, which has supported operating margins.

    The increase in interest expense could be due to the blockage of funds in the oil pool account. Consequently, the company had to resort to short-term borrowings for meeting working capital requirement. Depreciation costs have declined substantially, which has buoyed BPCL's pre-tax profits. The drop in depreciation is due to lower procurement of LPG cylinders. The company continues to charge 100% depreciation on LPG cylinders.

    Tax for quarter ended June '01 includes deferred tax of Rs 432 m. Deferred tax liability for previous years will be adjusted against reserves of the company. In 1QFY02, excluding deferred tax, effective tax rate of the company has increased by 480 basis points over the corresponding period of the previous year. Effective tax rate has increased to 22.4%.

    At Rs 186 the company trades on a multiple of 6.3x 1QFY02 annualised earnings.

     

     

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