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BPCL: Skids under pressure

Oct 31, 2001

Bharat Petroleum Corporation Ltd. (BPCL), one of the big three public sector refining & marketing companies, has reported dismal numbers for the quarter ended September '01. The difficult conditions prevailing in the domestic industry seem to have reflected on the financials. Refineries were confronting challenges, same time last year, as oil prices were skyrocketing threatening to reach $30 / barrel.

(Rs m)2QFY012QFY02Change
Net Sales 95,627 87,609 -8.4%
Other Income 359 687 91.4%
Expenditure 88,272 83,790 -5.1%
Operating Profit (EBDIT) 7,355 3,819 -48.1%
Operating Profit Margin (%)7.7%4.4% 
Interest 699 745 6.6%
Depreciation 1,697 993 -41.5%
Profit before Tax5,3182,768-48.0%
Tax 1,729 949 -45.1%
Profit after Tax/(Loss) 3,589 1,819 -49.3%
Net profit margin (%)3.8%2.1% 
No. of Shares (eoy) 150 300  
Diluted Earnings per share*47.924.3 
P/E Ratio 6.6 
*(annualised)   

The sharp drop in sales is reflective of the depressed growth in refinery throughput for the industry. Key petroleum products, which posted double digit growths in the second quarter of FY01, have reported reduced growth rates. Diesel and kerosene sales have declined by 6.4% and 6.8% respectively over the same quarter of the previous year. Consequently, overall product sales have declined by 1.2% for 2QFY02. A weakening across the global economy led to declining international petroleum prices, which is likely to have put pressure on refinery yield realisations.

An indication of the same -- lower realisations -- is the decline in gross refining margins from $3.3 / barrel to $2.1 / barrel. This has contributed to the sharp reduction in operating margins. OPM has declined by 330 basis points. Average oil prices for the quarter are estimated at $26 / barrel, which is not lower compared to the average prices in the same quarter of the previous year. In fact, raw material costs have increased marginally by 3.2%. The real thrust in cost reduction has come from a sharp reduction in purchase of products for re-sale. This could indicate both reduced purchases and lower prices for petroleum products.

At Rs 160 the scrip is trading on a multiple of 6.6x 2QFY02 annualised earnings.

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