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BPCL : Bottomline in black

Aug 14, 2013 | Updated on Oct 30, 2019

Bharat Petroleum Corporation Ltd (BPCL) has announced its results for the first quarter of financial year 2014 (1QFY14). During the quarter, the company has reported 7.7 % year on year (YoY) growth in sales and profits at the bottomline level. Here is our analysis of the results.

Performance summary
  • For the quarter, sales were up by 7.7% YoY.
  • The operating profits for the quarter stood at around Rs 9.4 bn (versus a loss of Rs 81.5 bn in 1QFY13). The operating profit margins for the quarter stood at 1.6% as compared to operating loss margins of 14.9% in 1QFY13.
  • The net profits for the quarter stood at Rs 1.5 bn as compared to net loss of Rs 88 bn in 1QFY13. The net profit margins for the quarter stood at 0.3% as compared to net loss margin of 16.2% in 1QFY13.
  • Crude throughput for the quarter stood at 5.63 mmt (million tonnes), down from 5.91 mmt IN 1QFY13 and versus 5.81 mmt in the preceding quarter
  • The market sales during the quarter stood at 8.59mmt, up from 8.5 mmt in 1QFY13 and 8.56 mmt in the preceding quarter.
  • Average gross refining margins (GRMs) for the quarter stood at US$ 4.05 per barrel (US$ 4.97 per barrel in the preceding quarter), up from US$ 2.62 per barrel in 1QFY13.
  • BPCL accounted for Rs 36.7 bn (flat YoY) as discount from the upstream segment during the quarter that was adjusted against the crude oil purchase cost.
  • BPCL has accounted around Rs 19.2 bn of subsidy (nil in 1QFY13) during the quarter from the Government to compensate for under recoveries on sensitive fuel products.
  • The net under recoveries absorbed by BPCL stood at around Rs 5.4 bn during the quarter, down 93% YoY.

Standalone financial performance
(Rs m)  1QFY13 1QFY14 Change 
Net sales  545,484 587,364 7.7%
Expenditure  626,984 577,999 -7.8%
Operating profit (EBDITA)  -81,500 9,366 nm
EBDITA margin (%)  -14.9% 1.6%  
Other income  3,138 3,383 7.8%
Interest  5,205 5,253 0.9%
Depreciation  4,801 5,305 10.5%
Profit before tax  -88,368 2,191 nm
Profit before tax margin (%)  -16.2% 0.4%  
Tax  0 688 nm
Profit after tax/(loss)  -88,368 1,503 nm
Net profit margin (%)  -16.2% 0.3%  
No. of shares (m)    723  
Diluted earnings per share (Rs)*    161  
P/E ratio(x)**    nm  
*on trailing 12 months basis
**using consolidated earnings as the base

What has driven the performance in 1QFY14?
  • The revenues for the year witnessed a growth of 7.7%. This was supported by higher market sales during the year. The retail sales of petrol, high speed diesel and aviation fuel were up by 11.6% YoY, 7.3% YoY and 9.8% YoY respectively. However, the sales growth were slightly offset by decrease in the LPG (down 6.5% YoY ), fuel oil (down 26.2% YoY) and RLNG (down 9.0% respectively)

  • The operating margins were positive during the quarter on the back of higher gross refining margins and subsidy support from the Government. The average gross refining margins for the quarter stood at US$ 4.05 per barrel, up 54.6% YoY while subsidy support from the Government stood at Rs 19.2 bn versus nil contribution in 1QFY13.

  • BPCL booked profits worth Rs 1.5 bn at the bottomline level as compared to net loss margins of 16.2% in 1QFY13.This was mainly on the back of subsidy support from the Government and higher refining margins. As a result of the same, the net under recoveries for BPCL declined by 93% YoY.

    Cost breakup
    (Rs m) 1QFY13 1QFY14 Change
    Raw materials 584,708 537,674 -8.0%
    % sales 107.2% 91.5%  
    Staff cost 5,832 8,314 42.6%
    % sales 1.1% 1.4%  
    Other expenditure 36,445 32,010 -12.2%
    % sales 6.7% 5.4%  
    Total costs 626,984 577,999 -7.8%
    % sales 114.9% 98.4%  
What to expect?

While developments like phased deregulation of retail diesel are positive for the company, they are likely to increase competition from the private players and can lead to a decline in the BPCL's market share. Also, crude price volatility, adhoc subsidy sharing mechanism and currency volatility are some of the concerns for the company.

At the current price of Rs 294, the stock of BPCL is trading at 10.4 times the standalone earnings estimates in FY15. At current prices, we recommend investors to 'Hold' the stock. We would like to gently remind you that your allocation to equities should be decided upon after keeping aside some safe cash. Also within your overall exposure to equities please ensure that you broadly follow our suggested asset allocation and that no single stock comprises more than 5% of your portfolio.

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Jun 17, 2021 (Close)