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BPCL: Realisations led growth - Views on News from Equitymaster
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  • Aug 1, 2003

    BPCL: Realisations led growth

    Bharat Petroleum Corporation (BPCL) announced its 1QFY04 results yesterday. The company reported a 14% rise in its topline while the bottomline growth was even higher by about 30%. Higher realisations and reduction in interest outgo were the key reasons for the strong bottomline performance. Lets take a detailed look at the results.

    (Rs m) 1QFY03 1QFY04 Change
    Net sales 97,479 111,435 14.3%
    Other Income 608 798 31.3%
    Expenditure 92,590 105,945 14.4%
    Operating Profit (EBDIT) 4,889 5,490 12.3%
    Operating Profit Margin (%) 5.0% 4.9%  
    Interest 625 335 -46.4%
    Depreciation 1,010 1,158 14.7%
    Profit before Tax 3,862 4,795 24.2%
    Tax 1,412 1,602 13.5%
    Profit after Tax/(Loss) 2,450 3,193 30.3%
    Net profit margin (%) 2.5% 2.9%  
    No. of Shares 300 300  
    Diluted Earnings per share* 32.7 42.6  
    P/E Ratio   6.4  

    BPCL reported a 14% growth in its topline. The company had witnessed a decline in its refinery output by about 6%. It should be noted that this seems to be on account of a planned shutdown, which the company has undergone during the June quarter. While the volumes of naphtha (21%), LPG (12%) and Petrol (1%) were higher in the recent quarter ended; volumes in case of diesel (4%) and furnace oil (9%) reported a dip during the same period. On an overall basis, market sales witnessed marginal decline. However higher realisations on account of improved petroleum product prices during the June quarter resulted into higher topline growth. It should be noted that though the prices declined thrice during the period, it were at higher levels as compared to previous period.

    Expenses also increased in line with the increase in topline. Though raw material costs and products purchase price for resale as a percentage of sales witnessed a decline, expenses on account of stock in trade rose significantly. Due to this, on an overall basis, expenses as a percentage of sales remained at the same levels. Consequently, operating margins also remained at the same levels as compared to the same period last year. Gross refining margins declined from Rs 1,596 per tonne to Rs 1,404 per tonne during the period.

    Apart from increase in realisations on account of higher relative prices, BPCL managed to reduce its interest outgo significantly by about 50% and this further resulted into higher bottomline growth. On an overall basis the company reported a bottomline growth of about 30%.

    At Rs 272, the stock is trading at a P/E multiple of 7.9x its FY04E earnings. BPCL has aggressive plans to open up 1,000 retail outlets during the current year in anticipation of competition expected from entry of private players. Increased industrial activity, normal monsoons and better growth in auto sector are a long term positive for the company. Prices of petroleum products primarily petrol and diesel declined thrice during the current year. With crude oil prices stabilizing at the current levels, we expect that the prices may hold steady at current levels. This will result into lower realisations on a YoY basis. Though, in FY04 the company may not be able to pose results in line with FY03, long-term prospects look promising.



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