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BPCL: Net losses up 49% - Views on News from Equitymaster

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BPCL: Net losses up 49%
Aug 16, 2011

BPCL has announced the first quarter results for financial year 2011-2012 (1QFY12).The company has reported a 35% year on year (YoY) growth in topline and loss margins at 5.6% for the bottomline. Here is our analysis of the results.

Performance summary
  • Topline registers a growth of 34.8% YoY during the quarter.
  • The company reported a loss at operating profits level leading to loss margins at 4.7% versus loss margins at 4.1% in the same quarter last year (1QFY11).
  • The company reported a loss at bottomline level, resulting in net loss margins at 5.6%, versus net loss margins at 5% in the same quarter last year (1QFY11).
  • The throughput at 5.2 MMT was down 7% YoY during the quarter.
  • The market sales volumes at 7.83 MMT were up 6% YoY during the quarter.
  • The export sales volumes at 0.7 MMT registered an increase of 37% YoY during the quarter.

Standalone results
(Rs m) 1QFY11 1QFY12 Change
Net sales 342,325 461,396 34.8%
Expenditure 356,384 483,038 35.5%
Operating profit (EBDITA) -14,059 -21,642 nm
EBDITA margin (%) -4.1% -4.7%  
Other income 3,209 4,273 33.2%
Interest 2,324 3,349 44.1%
Depreciation 4,007 4,901 22.3%
Profit before tax -17,181 -25,619 nm
Profit before tax margin (%) -5.0% -5.6%  
Tax - -  
Profit after tax/(loss) -17,181 -25,619 nm
Net profit margin (%) -5.0% -5.6%  
No. of shares (m)   362  
Diluted earnings per share (Rs)*   19.4  
P/E ratio(x)*   35.2  

What has driven performance in 1QFY12?
  • The company registered net sales worth Rs 461 bn during the quarter. This implied a 35% YoY in the topline on account of increase in the sales volume. During the quarter, the company registered market sales volumes of 7.83 MMT, up 6% YoY. The sales also included government compensation worth Rs 35 bn.

  • The company reported operating loss of Rs 22 bn during the quarter, with loss margins at 4.7% (versus loss margins at 4.1% during 1QFY11). The operating losses increased by 54% YoY. This was mainly on account of high cost of crude oil and under recoveries on the major petroleum products. The raw material expenses increased 37.6% YoY from 98% of sales to 100.2% of sales. The gross refining margins (GRMs) for the quarter came at US$ 3.02 per barrel versus US$ 3.57 per barrel, down 15% YoY. This was mainly on account of lower throughput at Kochi refinery and temporary shutdown of plants on account of power shortage problems.

  • The company registered a net loss of Rs 26 bn during the quarter, with net loss margins at 5.6% (versus 5% in 1QFY11). The interest and depreciation charges were up 44% YoY and 22% YoY respectively during the quarter. The loss was on account of lower GRMs and significant under recoveries despite a hike in fuel prices
What to expect?

At current price of Rs. 685, the stock trades at 35.2 times the trailing 12 months earnings. The company has suggested a time period of 4 to 5 years for expansion of Kochi refinery post all the approvals which are expected by the end of the current year. As far as downstream companies are concerned, a major chunk of the subsidies by the Government and upstream companies is decided at the end of the financial year. Hence, quarterly results by itself cannot be a major determinant as far as company valuations are concerned. As per our estimates, the current stock price implies a point to point return of 2.3% and an average annual compounded return of 0.9% with respect to a horizon period till end of FY13.

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