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SBICAP Securities
BPCL (Hold)
CMP: ₹653.40
Target: ₹663
We are of the view that there is limited upside for the stock from the current levels. The key takeaways are:
a) Timely payment from the government: Historically, OMCs received a major portion of their compensation from the government over Q3 and Q4 of the fiscal year, which resulted in earnings volatility. BPCL indicated that OMCs now receive compensation quicker than before.
b) Over-recovery issue: In October, OMCs were making an over-recovery of ₹1.90/litre. This over-recovery has been partially set off by the excise duty hikes announced in November and December.
c) Kochi refinery brownfield expansion is expected to be commissioned in May 2016: BPCL is expanding its Kochi refinery capacity to 15.5 mmtpa from 9.5 mmtpa. This is expected to get commissioned in May 2016.
d) Mozambique FID to be closed over F16e: BPCL is expected to close FID over F16e for Mozambique E&P blocks. Our ‘Hold’ call on the stock is driven by a) lack of any fresh triggers during near-term and b) priced-in diesel deregulation.
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