Leading brokerage firm Emkay Global has given a buy call to the stock of Bharat Petroleum Corporation Limited (BPCL), an Indian government-owned company that has been assigned Maharatna status. The brokerage firm says that the stock of BPCL will give a return of 27.3% in 12 months period. The company has declared a gross profit of Rs 111 bn in Q4 that ended in March.
1. Target Price And Company Performance
As of now the Current Market Price (CMP) of Bharat Petroleum Corporation Limited is Rs 326. Emkay Global has estimated the target price of BPCL stock at Rs 415 and the stock is expected to offer a return of 27.3% in 12 months period. BPCL has reported its Q4 standalone EBITDA (earnings before interest, taxes, depreciation, and amortization) at Rs 44.5 billion that remained up by 4%. The company's PAT (Profit After Tax) was declared at Rs 21.3 billion that remained down by 13% q-o-q. EBITDA and PAT beat the estimates of Emkay Global by 38% and 43% respectively as a result of 12% GRM (Gross Refining Margin) beat and 2 times higher marketing inventory gains partly offset by stronger opex (operating Expenditure). BPCL's GRM was reported higher at 15.3/bbl (vs 13.6 estimated). Meanwhile, the marketing inventory gain in Q4 was declared at Rs 31.8 billion.
|Current Market Price (CMP)||Target Price (TP)||12 months Return|
2. Emkay Global Viewpoint
Emkay Global said, "We value BPCL on a SOTP basis, with investments at a 30% holdco discount (Holding Company discount). We slightly lowered the target EV(Enterprise Value)/EBITDA multiple from 5.6x to 5.4x with no disinvestment premium anymore. While the current scenario is weak with negative auto-fuel margins, we maintain Buy owing to reasonable valuations and expectations of a gradual recovery in margins to normative levels."
However, the company's net debt surged to 25% year-on-year/ 26% q-o-q to approximately Rs 276 billion with interest cost rose by 20% to Rs 5.3 billion. Emkay Global slashes FY23 EPS by 19% bringing down marketing margins ahead.
Depreciation also moved higher by 9% and forex loss was lower than anticipated at Rs 2.0 billion. Meanwhile, the tax rate remained higher at 29.9% as a result of provisions from earlier years. Refining surged by 14%. Bina Refinery, owned by Bharat Oman Refineries Limited and BORL is a wholly owned subsidiary of BPCL, reported a PAT of 8.92 billion in FY22. The merger in underway.
3. About Bharat Petroleum Corporation Limited
BPCL has been assigned the Maharatna status. It has emerged as one of the best performing public sector undertaking from being an Oil and Gas Company in India to a Fortune 500 oil refining, exploration, and marketing conglomerate. The market capitalisation of BPCL is 69,925 crore. The company has hit a 52-week high of 503.00 and 52-week low of 312.
The above stock was picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.