- 01 Nov 2021
- ICICIdirect Research
Bharat Petroleum Corp.: Divestment process and its timeline to be the key determinant for stock performance
BPCL - 358 Change: 1.20 (0.34 %)What’s buzzing – BPCL’s Q2FY22 results were better than estimates mainly on account of higher than expected refining margins of US$ 6/bbl.
Context – BPCL’s revenues increased 13.3% QoQ to Rs.101631.7 crore, higher than estimated revenue of Rs. 94898.5 crore. Marketing sales at 9.9 MMT were largely in line with estimate. The company reported marketing inventory gain of Rs. 227 crore. On the refining front, reported GRMs at US$ 6/bbl were higher than the estimate of US$ 3.9/bbl on account of improvement in product cracks. Also, employee costs were lower than estimates at Rs. 769.4 crore. Subsequently, EBITDA at Rs.4477.7 crore (up 37.7% QoQ) was higher than our estimate of Rs.3504.8 crore. Reported PAT was at Rs.2694.1 crore, up 79.4% QoQ (our estimate: Rs.2035.2 crore).
Our perspective - Petrol demand improved QoQ post relaxations in lockdown while diesel demand was lower during Q2FY22 while overall marketing performance was largely in line with expectations. During the current quarter (Q3FY22E-TD), fuel demand is expected to improve further. With recovery in product cracks in current quarter, GRMs sustaining at higher level will be the key. We expect better GRMs in coming quarters on the back of commissioning of additional petchem capacity and continued rebound in product cracks. Improvement in GRMs and further recovery in fuel demand (mainly Diesel) along with stable marketing margins will lead to better performance. Divestment process and its timeline will be the key determinant for stock performance in near term.