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BRPL: Riding high on the segments

Aug 12, 2004

Introduction to results
Bongaigaon Refineries (BRPL), a pure refining subsidiary of India Oil Corp (IOC) posted robust 1QFY05 results recently. Backed by better capacity utilization and higher refinery gate prices the topline witnessed a jump of 60% YoY, the bottomline improved by 54% YoY.

What is the company's business?
BRPL is a pure refining player with a capacity of 2.35 MMTPA (million tonnes per annum). The company also has a presence in certain petrochemical products. Being situated in the northeastern region of the country, BRPL enjoys certain tax benefits. Further, an LPG bottling plant has also been set up so as to cater to the eastern markets. BRPL recently restarted the DMT and polyester staple fibre (PSF) plants after being shut down for two years on economic grounds.

(Rs m) 1QFY04 1QFY05 Change
Net sales 6,133 9,820 60.1%
Other income 43 50 15.7%
Expenditure 4,869 7,848 61.2%
Operating profit (EBDITA) 1,265 1,972 55.9%
Operating profit margin (%) 20.6% 20.1%  
Interest 52 15 -71.5%
Depreciation 75 81 8.1%
Profit before tax 1,181 1,925 63.1%
Tax 322 603 87.5%
Profit after tax/(loss) 859 1,323 53.9%
Net profit margin (%) 14.0% 13.5%  
No. of shares (m) 199.8 199.8  
Diluted earnings per share (Rs)* 17.2 26.5  
P/E ratio (x)   2.4  
(* annualised)      

What has driven performance in 1QFY05?
Sales: The topline growth of 60% is largely due to strong realizations on the back of robust refinery gate product prices. Further, the upside in the petrochemicals cycle also helped post decent growth in the topline. During the quarter, capacity utilization improved by 500 basis points as against the corresponding quarter last fiscal (93% in 1QFY05 as against 88% in 1QFY04). The following table gives a clear indication of the contribution by various business segments towards topline growth.

Expenditure Table
(%) of sales 1QFY04 1QFY05
Raw materials consumed 73.2% 71.2%
Staff cost 2.7% 2.0%
Other expenditure 3.5% 6.7%
Segmental Revenue
Segmental revenue* 1QFY04 1QFY05 (%)Change
Refining 5,846 10,129 73.3%
Petrochemicals 153 553 260.9%
PSF 2 719 42164.7%
Total 6,001 11,400 90.0%
(*) Gross revenue      

Cost control remains the focus: Due to higher utilizations, the company's other expenditure has increased significantly. However, better raw materials and staff management have helped the company arrest a major fall in operating margins, which have declined by 50 basis points YoY. Also, strong realizations for products have helped the company reduce the margin of decline.

Segmental EBIT 1QFY04 1QFY05 (%)Change
Refining 1,252 1,915 52.9%
Petrochemicals 32 87 170.6%
PSF (67) (73) 9.1%
Total 1,217 1,928 58.5%

Net profit: The bottomline jump of 54% can be attributed to strong refining margins. The company has been able ride high on the uptrend in the petrochemicals cycle along with strong petro-product prices. However, the chemicals division has resulted in losses. A decent 15% rise in other income coupled with a sharp 72% decline in interest outgo have helped the company post robust bottomline growth.

Over the last four quarters: The Company's fortunes over the last four quarters have swung both the extremes as it witnessed a major dip in growth 3QFY04, while revival of product prices during the 4QFY04 led to a strong growth in the realizations as well as the bottomline.

What to expect?
BRPL is currently trading at Rs 63, implying a P/E multiple of 2.4x annualized 1QFY05 results. The company is likely to benefit from the continuing uptrend in petro-product prices. Further, the uptrend in the petrochemicals cycle is likely to continue for another six months, which would benefit the company. Assured volumes from IOC are another major positive for the company. However, we believe, the stock is vulnerable to government policies such as custom duty cuts and to that extent, risky.

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Apr 20, 2009 (Close)


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