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BPCL: Surprising story - Views on News from Equitymaster
 
 
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  • Oct 31, 2000

    BPCL: Surprising story

    Bharat Petroleum Corporation Ltd. (BPCL) has posted a strong topline growth of 43%. The increase in turnover was driven by increased volume and price realisations. Market sales contributed to the increased volume. Throughput of the refinery declined due to planned shutdowns in the 1st half. Throughput declined from 4.5 m tonnes to 4.1 m tonnes in 2QFY01.

    (Rs m) 2QFY00 2QFY01 Change
    Sales 76,001 108,968 43.4%
    Other Income 318 359 12.9%
    Expenditure 71,692 101,613 41.7%
    Operating Profit (EBDIT) 4,309 7,355 70.7%
    Operating Profit Margin (%) 5.7% 6.7%  
    Interest 415 699 68.4%
    Depreciation 1,404 1,697 20.9%
    Profit before Tax 2,808 5,318 89.4%
    Tax 740 1,729 133.6%
    Profit after Tax/(Loss) 2,068 3,589 73.5%
    Net profit margin (%) 2.7% 3.3%  
    No. of Shares (eoy) 150 150  
    Diluted Earnings per share* 55.1 95.7  
    P/E Ratio   1.8  
    *(annualised)      

    The company has reported a meteoric growth in operating profits (up 71%). The growth is primarily driven by increased volumes. Surprisingly, the company has also shown a rise in OPM, which has contributed to the profit growth.

    The company has surprisingly reported a 100 basis points increase in OPM. This is to be considered in the backdrop of rallying crude oil prices during 2QFY01. Crude oil prices in this period touched new ten year highs of $35/ barrel. Peer group companies have reported a drop in OPM by more than 100 basis points. How has BPCL beaten the trend? The company has accounted for prior period items, which could have boosted the OPM.

    The sharp increase in interest payments has been due to increased borrowings for meeting working capital requirements. The net working capital has increased as a result of increased business activity and also due to the non-receipt of funds from the oil co-ordination committee (OCC).

    The three year average P/E multiple of BPCL is 12.6. It is currently trading at a multiple of 1.8 on 2QFY01 annualised earnings.

     

     

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