Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
BPCL: APM dismantling brings gains - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Nov 14, 2002

    BPCL: APM dismantling brings gains

    Refining & marketing (R&M) companies have shown dramatic improvement in financial performance after experiencing a challenging fiscal last year. Dismantling of the administered pricing mechanism (APM) from April 1, 2002 has yielded significant gains for the industry. While having made a cautious start to free pricing, marketing companies revised petrol & diesel prices over the past five consecutive fortnights ending October 15, 2002.

    (Rs m) 2QFY02 2QFY03 Change 1HFY02 1HFY03 Change
    Net sales 87,609 95,199 8.7% 177,756 192,678 8.4%
    Other Income 687 1,097 59.7% 1,043 1,705 63.5%
    Expenditure 83,790 89,444 6.7% 169,430 182,034 7.4%
    Operating Profit (EBDIT) 3,819 5,755 50.7% 8,326 10,644 27.8%
    Operating Profit Margin (%) 4.4% 6.0%   4.7% 5.5%  
    Interest 745 603 -19.1% 1,466 1,228 -16.2%
    Depreciation 993 1,274 28.3% 1,705 2,284 34.0%
    Profit before Tax 2,768 4,975 79.7% 6,198 8,837 42.6%
    Tax 949 1,729 82.2% 2,150 3,141 46.1%
    Profit after Tax/(Loss) 1,819 3,246 78.4% 4,048 5,696 40.7%
    Net profit margin (%) 2.1% 3.4%   2.3% 3.0%  
    No. of Shares 300 300   300 300  
    Diluted Earnings per share* 24.3 43.3   27.0 38.0  
    P/E Ratio         4.9  

    Turnover and post tax profits of BPCL fell by 8% and 49% respectively in 2QFY02, which has facilitated, to an extent, the YoY improvement in financial performance for quarter ended September '02. Compared to a 1.2% drop in product sales, 2QFY03 sale volumes have increased by 5.2% YoY. Having said that, the rise in volumes is primarily due to exports while domestic sales have risen marginally in the concerned quarter. In fact, domestic sales for half-year ended September '02 are lower by 1.7% YoY.

    Aggregate volumes growth seems to be driven by light distillates, petrol and LPG. Upturn in the automobile industry, we reckon, is likely to have triggered higher consumption of petrol and diesel. Focused efforts by industry has led to LPG replacing kerosene, as domestic fuel of choice. LPG has been registering double digit growth over the past three years. Industry has introduced a 5 kg LPG cylinder to penetrate the rural market. The lubricants business, which is dependent on the automobile sector and contributes a larger share to operating profits, has registered an impressive 19% YoY growth in 1HFY03. We reckon, depressed airline industry, shift in domestic fuel preference and sluggish industrial growth is likely to have affected offtake of ATF, kerosene and heavy distillates respectively, which is likely to have affected domestic volumes. With improving marketing margins, volumes have been driven by products purchased for re-sale, which have increased 12.2% YoY in 2QFY03.

    Blended realisations have incresed by an estimated 3.3% YoY in 2QFY03, which are likely to have been pulled down by ATF and heavy distillate prices due to considerable weakening in the global economy. Petrol and diesel prices rose by an estimated Rs 1.3/ litre and Rs 1.9/ litre during the quarter. We reckon, revision in the vehicular fuel prices is likely to have grossed BPCL an incremental Rs 4.2 bn for the concerned period. That said, raw material cost has spiraled, especially considering the 1.3% YoY decline in throughput, by 35% in 2QFY03. International crude oil prices (Brent blend), although rising over 2002, are higher by an average 6.1% over the same period last year. Considering the weak global economy and firm feedstock prices, we reckon, refining margins continue to remain thin while marketing margins are likely to have improved. Operating margins have been supported by inventory gains and provisions for reimbursement of subsidy against LPG and kerosene. In 2QFY03, BPCL has written off bad debts of Rs 834 m towards supply of naphtha to Nocil.

    Interest expense has been declining over the past two quarters. The company could have taken advantage of softer interest rates by refinancing debt. Also, as mentioned in our 1QFY03 report, the company has received funds from the Government in lieu of LPG and kerosene subsidy. On pro-rata basis, estimated amount of funds received for first five months of FY03 was Rs 3.8 bn. Reimbursement of subsidy will have improved cash flows reducing working capital requirements. Depreciation charges, similar to 1QFY03, are higher due to increase in procurement of LPG cylinders. To put in perspective the rise in procurement, cylinder depreciation rate has been reduced from 100% to 80% from FY03.

    At the end of first quarter, the BPCL scrip was quoting at Rs 297 on a multiple of 9.1x 1QFY03 annualised earnings. Currently, the scrip quotes at Rs 185 and is trading on a multiple of 4.9x 1HFY03 annualised earnings. Prior to build up of disinvestment expectations, BPCL historically traded in a band of 3x-6x earnings. We do not expect a sharp fall in international crude and petro prices therefore inventory gains are likely to accrue for rest of the year. Also, steady reimbursement of subsidy will support margins.



    Equitymaster requests your view! Post a comment on "BPCL: APM dismantling brings gains". Click here!


    More Views on News

    BPCL: Inventory gains boost profits (Quarterly Results Update - Detailed)

    Sep 10, 2016

    BPCL has reported 3.1% decline in the topline and 11% growth in the bottomline for the year ended June 2016.

    GAIL: A Good Show (Quarterly Results Update - Detailed)

    Mar 27, 2017

    GAIL (India) Ltd has announced results for the quarter ended December 2016. reported 9.4% year on year (YoY) decline in sales, while bottom-line grew 45.4% YoY.

    ONGC: Higher Realisations on Crude Support Performance (Quarterly Results Update - Detailed)

    Mar 17, 2017

    ONGC has announced results for the quarter ended December 2016. The company has reported 9.2 % year on year (YoY) growth in sales, while bottom-line grew 197% YoY.

    BPCL: Higher other income boosts profits (Quarterly Results Update - Detailed)

    Jan 20, 2016

    BPCL has reported 25.1 % YoY decline in the topline while bottomline for the quarter grew 119% YoY.

    BPCL: A strong quarter (Quarterly Results Update - Detailed)

    Sep 10, 2015

    BPCL has reported 22.2% YoY decline in the topline while bottomline grew by 95.4% YoY in the quarter ended June 2015.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)



    Detailed Financial Information With Charts