14 BPCL share price target reports by brokerages below. See what is analyst's view on BPCL share price forecast, rating, estimates, valuation and prediction behind the target. You may use these research report forecasts for long-term to medium term for your investment or trades in 2020.
We marginally tweak our FY21/22 earnings estimates. During FY20, core EBIDTA adjusted for inventory loss was healthy at Rs130bn (+14%YoY) despite lower refining margins ($2.5/bbl vs $4.6/bbl in FY19). Sharp drop in crude oil prices dragged down reported FY20 PAT, however, with crude oil prices recovering, part of the losses will be reversed. Benign crude oil prices is likely to support marketing margins in medium term, and lower operating cost will compensate for weak GRMs. Maintain BUY with a revised PT of Rs515 (Rs 517 earlier) as BPCL remains our preferred divestment play.
We maintain Buy on IOC and upgrade BPCL and HPCL from Accumulate to Buy following revised earnings and TP, which we have rolled over to FY22E. We see PSU refining majors (OMCs) delivering double-digit returns in the next 6-12 months based on the upside leverage to marketing margins under low oil prices below US$40-50/bbl. We believe that these stocks are poised to enter the blue sky phase last seen during FY14-17, when the steep fall in oil price from US$107 to US$47-50/bbl boosted marketing margins and earnings for the OMCs. As a result, IOC and BPCL delivered compounded returns of 39% and 40%, respectively while HPCL’s stock price witnessed a CAGR of 70% over April 2014-March 2017. This is likely to offset the risk to earnings from pressure on GRMs (tough to predict), inventory losses and the hit on refining and marketing volume (due to the COVID19 lockdown). We have raised earnings for the OMC trio assuming about 10% hit on volume in 1QFY21, weak GRMs and Rs3/lit upside in retail margins in FY21. These are subject to change as and when we get official confirmation on the lockdown impact. The INR/USD depreciation, while negative for MTM impact in fx loans, is overall a tailwind assuming that the combined spread in refining and marketing remains +ve. We have raised our TP for HPCL by 43.9% to Rs353 and for IOC a tad to Rs137. We are cutting the TP for BPCL by 22.6% to Rs414 based on our reduced target multiple - from 10.9x (10% premium to SD+1 on 5 year median) to 6.1x (SD-1), as the stake sale tailwind is likely to wane until the COVID-19 related uncertainty ends.
We are maintaining Accumulate rating on BPCL with a new target price (TP) of Rs534 (+11.9% to CMP), which we have raised by 4.2% based on 10.9x PE on Sept 21E (10% premium to SD+1 reading on 5yr median). This is after cutting FY20E earnings by 8.5% and increasing FY21E and FY22E earnings by 7.2% and1.4%, respectively post the 3QFY20 results call with BPCL management. Our TP compares with our DCF value of Rs428 and replacement value estimate at Rs527 (excluding Numaligarh). Our target PE factors in the potential re-rating from the proposed stake sale. The 3QFY20 results were a miss vs. the consensus and our estimates due to lower- than-expected normal margin (US$2.2/bbl vs. NBIE estimate of US$3.7/bbl). Reported GRM (including inventory gain) came in at US$3.23/bbl in 3QFY20. The outlook for 4QFY20 looks negative for BPCL and other OMCs given the high base of earnings in 4QFY19, which enjoyed peak marketing margins. This will be compounded by (i) weak GRMs and (ii) potential inventory losses from further downside to oil prices - already down 15% since Jan. OPEC and Oil consultant Rystad are cutting CY20 oil demand growth forecast by around 20% due to the impact of corona virus on Chinese fuel demand. In the medium term, we are positive on OMCs as (i) weak oil prices are +Ve for retail margins (ii) GRMs could also eventually recover as low oil prices may stimulate demand for petroleum fuels in other emerging markets (iii) A surplus in OPEC could widen the light heavy oil price spread (+Ve for complex refiners) that could get further tailwind as the output of US shale oil (light sweet grade) will likely plateau this year due to weak oil prices and financing for shale projects drying up. However, the stock may be driven more by the momentum in the stake sale based on visible progress on the deal milestones starting with the invitation for expression of interest expected shortly.
We lower our FY20-22 earnings estimates by 23% to factor in lower refining margins. During Q3, core performance for BPCL was weak due to weak refining and marketing performance. While benign crude oil prices is likely to support marketing margins in medium term, refining scenario has worsened with muted demand and lower than expected diesel demand post change in marine fuel norms. Maintain BUY with a revised PT of Rs537 (Rs600 earlier) as BPCL remains a divestment play. BPCL with a fully integrated operations remains a prized asset and we expect aggressive bidding by global majors.
The recent news on divestment of the entire Indian government’s stake in BPCL has led to the stock outperform nifty by ~40% (since Aug’19). We value the stock at 2.1x FY21E PBV, at par with FY15-18 which reflected true deregulation amidst comfortable oil prices, and arrive at a target price of INR533/share. Despite the upgrade in multiple, we do not see much upside in the stock. Hence, we maintain Neutral on the stock.
We believe current valuations have factored in the privatization scenario of BPCL. However, we remain cautious on the near-term outlook of BPCL owing to the uncertain demand for diesel which is in turn due to the ongoing slowdown in the Indian economy. We expect improvements in refining margins and higher utilizations to start kicking in from H1FY21 and we downgrade our rating on the stock to REDUCE with a revised target price of Rs. 474 using sum of the parts (SOTP) valuation.
The CCEA of India has approved the sale of the government’s 53.29% stake andtransfer of management control in BPCL, excluding the 61.65% stake BPCL holds in Numigarh Refinery Ltd.(NRL) in Assam (3 mn tonnes/year capacity). The CCEA has also approved the sale of the BPCL holding in NRL along with the transfer of management control to a Central PSU in oil&gas sector, which in our view could be either North east – based upstream company Oil India (holds 26% stake in NRL) or Indian Oil Corporation Ltd, which already operates three refineries in that region. In our view the BPCL stake sale excluding NRL will possibly have a smoother passage. This is because we believe that many potential buyers may not be too keen on taking over NRL, considering legacy political/security concerns over its location in the North East, notwithstanding its superior GRM profile including the excise benefit. We maintain accumulate rating on BPCL on our PE based TP of Rs 512/sh. Pl also refer our 2Q result mote dated November 11, 2019
In a significant decision, the Government has given cabinet approval to transfer government shareholding (53.29%) in BPCL, ex of the Numaligarh refinery (NRL), to a strategic investor. Transfer of management control is positive and will help the government optimize value; potential receipt ~Rs830bn, in our view. The transaction timelines remain tight and are expected to be closed by FY20 end. With ~25% fuel market share in India, BPCL will give a significant foothold in domestic market and we expect interest from range of suitors including global oil majors like Aramco, Rosneft, Shell etc. We remain positive on OMCs given benign crude price environment and value BPCL at Rs600 (Rs537 earlier) based on 8x EV/EBIDTA FY22E.
We are maintaining Accumulate rating on BPCL with revised target price (TP). We have raised our TP by 17.7% to Rs512 based on 10.9x PE on Sept 21E (10% premium to SD+1 reading on 5yr median) after cutting earnings by 25%, 12.5% and 6% over FY20E-FY22E post the 2QFY20 results call with BPCL management. Our TP compares with our DCF value of Rs484 and replacement value estimated at Rs583. Our target PE factors in the potential rerating from the proposed stake sale. The 2QFY20 results were a miss vs. the street and our estimates due to lower than expected normal margins (US$3.38/bbl vs. NBIE estimate of US$5.79/bbl) and inventory and fx loss of Rs260mn and Rs3.9bn, respectively, which we did not include in our forecast. The stock is likely to move based on the progress on government stake sale plans in the coming months, and hence results are likely to have a relatively lower impact. The catalysts for the stock in the run up to the stake sale are (a) the response from global oil & gas majors (b) the control premium expected from potential bidders that will depend on the potential long term fundamental outlook for refining and marketing and (c) whether the government offers BPCL as it is or it is split to separate activities like Numaligarh Refineries and the upstream business, which may not attract buyers and (d) how the deal is structured - in a single tranche or in two phases.
Future developments on privatisation of BPCL will be key to the stock price performance. In the near term, CCEA approval for privatisation and name of potential bidders will play an important role. We are neutral on BPCL at the current juncture given the sharp run-up in stock price and volatility in global GRMs. We have a HOLD rating on the stock with a target price of Rs 515. (based on average of P/BV multiple: Rs 532/share, P/E multiple: Rs 499/share).
We tweak our earnings to factor changes in lower refining margins for H1 and increase marketing margins. During Q2, core performance for BPCL was stable despite forex loss of Rs3.8bn and lower refining profitability. However, benign crude prices and recovery in refining margins is positive for the OMCs and hence we expect a much better H2FY20. State PSUs are also likely to benefit from implementation of IMO2020 effective January given >40% diesel slate. Maintain BUY with a revised PT Rs 537 (Rs 505 earlier) based on 12x PER FY21 given potential rerating from divestment of government stake.
Post the recent surge in BPCL’s stock price, valuation multiples are already pricing in a fully privatized scenario for the business (implied 6.8x EV/e vs. 4.8x assumed in base-case and 6.1x in best case). A further re-rating will depend on potential improvement in earnings and cash flows. This will obviously be realized with a lag and is contingent upon the private player’s ability to drive efficiencies. Our TP is Rs 450/sh (5.5x, 6.0x and 6.0x Sep-21E EV/e for BPCL’s refining, marketing and pipeline businesses + Rs 139 for investments). Downgrade to SELL.
Stable crude oil and exchange rate may drive structural changes in pricing of LPG and kerosene, bidding farewell to all under-recoveries. Factoring in the performance of 1QFY20 and the marginal impact of Ind-AS 116, we revise down our EPS estimate by ~16%/12% for FY20/21.BPCListradingat9.1xFY20Econsol.EPSofINR37.7and7.5xFY20E EV/EBTIDA. We value BPCL at 1.9x FY21E PBV multiple. We reiterate our Buyrating with a target price of INR465.
Inventory losses and shutdown of BPCL’s refinery has resulted in a muted 1Q performance. However, we maintain our BUY owing to its impeccable refining assets and healthy free cash flows (Rs 66.55bn) over FY21-22E. For BPCL, core GRMs are expected to improve further by USD 0.5 to 1.0/bbl by FY22E on account of gradual increase in share of heavy and cheap crude at its Kochi refinery. Additionally, restoration of marketing margins as elections have concluded is a key positive. Our SOTP target is Rs 434/share (5.5x Jun 21E EV/e for standalone refining, 6.0x Jun 21E EV/e for marketing, and pipeline business and Rs 129/sh for other investments). Maintain BUY.
We expect BPCL earnings could be more uncertain than before too with every US$1 change in GRM impacting EPS by 17% in FY20E, which makes us uncertain about its valuation premium. We have assumed US$4.25/bbl=FY20E /US$5.12/bbl=FY21E of total BPCL’s GRM (Current Sing GRM $3.5/bbl in 1QFY20) and gross marketing margin of Rs2.4/ lt. Further, Govt has delayed cooking fuel subsidy payments in FY19 and likely to delay in FY20 also on shortfall of budgeted amount which will increase debt burden of BPCL. We recommend REDUCE with Target Price of Rs 330 on 6X EV/EBITDA of FY21E.
BPCL Kochi refinery saw throughput of 4.4mmt (+11% YoY, +20% QoQ), in line with the expected stabilization. BPCL has a 10% stake in the prolific Offshore Area 1 in Mozambique. After almost a delay of 4-5 years, the final investment decision is likely to be concluded in 2019.BPCL is trading at 8.2x FY20E consol. EPS of INR47.7. We value BPCL at 1.8x FY21E PBV multiple. We reiterate Buy with a target price of INR452.
Maintain Sell rating with a target price of Rs300: Weak GRM environment, planned capex and interest costs are set to increase in the coming quarters which will exert pressure on cash flow and lead to increased debt. We remain concerned over the‘regulation’ of ‘deregulated’ products like motor spirit or MS and high speed diesel or HSD.
We upgrade oil marketing companies (OMC’s) to BUY as we look beyond May 2019, wherein two important factors that determine the fortunes of OMCs gets settled-1) Central elections and uncertainties of policy overhang 2) clarity on Iran sanctions, which will determine trends in international crude oil prices. We believe that the risk-reward for the OMCs are favorable as US-China trade discord and weakening global economy will prevent any sharp rise in crude prices. Post Central elections, risk of government intervention on marketing margins is also likely to come down significantly. As a result, we increase our marketing margin assumptions (from Rs1.75 to Rs2.8/litre for FY20E) and target multiples to 10x PER FY20E against 8x earlier. BPCL/HPCL are top picks.
Bharat Petroleum Corporation or BPCL’s reported earnings of Rs4.9bn in 3QFY19 were down 76.9% YoY and 59.4% QoQ. The key reasons are: 1) Decline in gross refining margin or GRM from US$7.89/bbl in 3QFY18 and US$5.57/bbl in 2QFY19 to US$2.78/bbl in 3QFY19. 2) Interest expenses at Rs3.4bn, rose 2.8% QoQ and 68.3% YoY. However, EBIT-level loss was converted into profit by: 1) Growth in other income to Rs9.6bn – a rise of 79.8% QoQ and 33% YoY. 2) Decline in other expenses to Rs33.6bn – a fall of 30.5% QoQ and 7.2% YoY. 3) Sharp decline in the tax rate to 16% in 3QFY19 from 35% in 2QFY19 and 29% in 3QFY18. We have maintained Sell rating to the stock with a target price of Rs300.
SOURCE: Data from D'Market via Quandl. Intraday data delayed 15 minutes.
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