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BPCL: Inventory gains boost profits - Views on News from Equitymaster

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BPCL: Inventory gains boost profits
Sep 10, 2016

Bharat Petroleum Corporation Ltd (BPCL) has reported results for the quarter ended June 2016. The company has reported net sales decline of 9.9% YoY for the quarter while net profits grew by 11.0% YoY. Here is our analysis of the results.

Performance summary

Topline for the quarter declined 9.9% YoY due to lower realizations. Market sales for the quarter stood at 9.73 MMT, up 8% YoY. Crude throughput for the quarter stood at 6.2 MMT (up 2.1% YoY). The average gross refining margin (GRM) stood at US$ 6.09 per barrel, down from US$ 8.55 per barrel in the corresponding quarter of the year. However, these included inventory gains and management, the exact impact of which remains unclear. The management has not clarified much regarding marketing margins during the quarter. Net profit for the quarter grew 11% YoY. BPCL absorbed nil under recovery losses on the sale of sensitive petroleum products. However, receivables outstanding from the Government stand at Rs 18 bn. The company has issued Bonus shares in the ratio of 1:1 in July 2016.

Standalone performance summary
Rs m 1QFY16 1QFY17 Change
Net sales 520,205 468,902 -9.9%
Other operating income 506 485 -4.1%
Total income 520,711 469,387 -9.9%
Expenditure 482,651 430,195 -10.9%
Operating profit (EBDITA) 37,554 38,707 3.1%
EBDITA margin (%) 7.2% 8.3%
Other income 3,296 3,649 10.7%
Interest 1,170 1,111 -5.0%
Depreciation 5,401 4,315 -20.1%
Profit before tax 34,785 37,415 7.6%
Profit before tax margin (%) 6.7% 8.0%
Tax 11,178 11,210 0.3%
Effective tax rate (%) 32.1% 30.0%
Profit after tax/(loss) 23,607 26,205 11.0%
Net profit margin (%) 4.5% 5.6%
No. of shares (m) 723
Diluted earnings per share (Rs)* 106
P/E ratio(x)* 5.6

* On a trailing 12-months basis

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