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| India Infoline Research Team / 10:35 , Feb 14, 2012 |
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CMP Rs589, Target Rs620, Upside 5.3%
- Net sales for Q3 FY12 rises 60.4% yoy driven by 1) sharp yoy jump in government share, 2) higher average realizations and 3) 8.6% increase in market sales
- Upstream companies shared under recovery burden worth Rs35.7bn in Q3 FY12 v/s Rs11.7bn in Q3 FY11
- Government contribution for both Q2 FY12 and Q3 FY12 was accounted for in Q3 FY12
- Throughput was higher by 21.9% at 6.1mn tons, but GRMs were lower by 25% yoy to US$3.5/bbl
- Uncertainty over subsidy sharing pattern to continue, keeping the impact of recent reforms limited, maintain MP rating
Result table
(Rs m)
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Q3 FY12
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Q3 FY11
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% yoy
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Q2 FY12
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% qoq
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Net sales
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588,468
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366,859
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60.4
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423,019
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39.1
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Material costs
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(226,295)
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(155,812)
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45.2
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(198,637)
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13.9
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Purchases
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(288,574)
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(178,431)
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61.7
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(219,959)
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31.2
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Personnel costs
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(4,892)
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(5,696)
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(14.1)
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(4,381)
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11.7
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Other overheads
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(31,610)
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(19,433)
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62.7
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(26,990)
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17.1
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Operating profit
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37,097
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7,488
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395.4
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(26,948)
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(237.7)
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OPM (%)
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6.3
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2.0
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426 bps
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(6.4)
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1267 bps
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Depreciation
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(4,667)
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(3,700)
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26.1
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(4,600)
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1.4
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Interest
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(5,174)
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(2,747)
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88.3
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(4,532)
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14.2
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Other income
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4,166
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3,103
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34.3
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3,787
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10.0
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PBT
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31,422
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4,144
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658.3
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(32,293)
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(197.3)
|
Tax
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(26)
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(2,270)
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(98.8)
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-
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-
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Effective tax rate (%)
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0.1
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54.8
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-
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Reported PAT
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31,396
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1,874
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1,575.5
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(32,293)
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(197.2)
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PAT margin (%)
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5.3
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0.5
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482 bps
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(7.6)
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1297 bps
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Ann. EPS (Rs)
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347.4
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20.7
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1,575.5
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(357.3)
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(197.2)
| Source: Company, India Infoline Research
Sharp jump in upstream contribution leads to higher revenues
Bharat Petroleum Corporation Ltd (BPCL) reported 60.4% yoy rise in net sales to Rs588bn for Q3 FY12. Market sales at 8mn tons were higher by 8.6% yoy on the back of 5% and 12.9% increase in volumes of petrol and diesel respectively. Furthermore, LPG and ATF volumes were higher by 9.8% and 7.2% yoy respectively. However, volumes of naphtha and furnace oil witnessed a sharp fall. Realizations have been higher in line with average crude oil prices during the period and price hike implemented towards the end of Q1 FY12 for LPG and HSD. Petrol prices were also raised during the quarter. During Q3 FY12, BPCL accounted for Rs35.7bn as compared to Rs11.7bn in Q3 FY11 from upstream companies in the form of discounts on purchase of crude oil, LPG and SKO. For Q3 FY12, Rs69.9bn (including government share of Q2 FY12) has been accounted from the government as compared to Rs18bn in Q3 FY11.
Uncertainty on subsidy sharing pattern continues
During 9m FY12, upstream companies bore 38% of the gross under recoveries in the industry as compared to 33% in H1 FY12. For BPCL, cumulative 9m FY12 gross under recoveries were at Rs228bn, of which government share was at Rs105bn and upstream share was Rs86bn leaving about Rs36.5bn to be borne by BPCL. While the accounting has been done, cash flow from the government has been sporadic.
Refining segment improves qoq
During Q3 FY12, BPCL refineries had a combined throughput of 6.1mn tons, an increase of 21.9% yoy and 9.9% qoq. With market sales growing by 8.6%, the marketing volumes to total throughput ratio decreased from 1.5x in Q3 FY11 to 1.3x in Q3 FY12. GRMs for Q3 FY12 were at US$3.5/bbl as compared to US$4.6/bbl in Q3 FY11 and US$1.7/bbl in Q2 FY12.
Higher interest and depreciation offset by rise in other income
During Q3 FY12, BPCL reported a net profit of Rs31.3bn vs Rs1.8bn in Q3 FY11. Apart from higher government compensation, 34.3% yoy jump in other income helped the cause. Profits were however, impacted by a 26.1% jump in depreciation and 88.3% jump in interest cost, which was on the back of higher debt positions and increased interest rates.
Reforms played out but uncertainty continues
The government has made bold moves through completely de-regulating petrol prices and through price hikes for diesel, LPG and Kerosene. This has reduced gross under recoveries estimate considerably for FY12. However, with no formula arrived for subsidy sharing pattern, uncertainty on earnings for oil marketing companies continues. The situation seems to be better off vis-à-vis previous few years, which we believe is adequately factored in the current price. For BPCL, we maintain our Market Performer rating, with a 9-month target price of Rs620.
Cost analysis
As a % of net sales
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Q3 FY12
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Q3 FY11
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bps yoy
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Q2 FY12
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bps qoq
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Material costs
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38.5
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42.5
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(402)
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47.0
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(850)
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Purchases
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49.0
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48.6
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40
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52.0
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(296)
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Personnel Costs
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0.8
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1.6
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(72)
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1.0
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(20)
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Other overheads
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5.4
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5.3
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7
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6.4
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(101)
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Total costs
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93.7
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98.0
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(426)
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106.4
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(1,267)
| Source: Company, India Infoline Research
Financial summary
Y/e 31 Mar (Rs m)
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FY10
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FY11
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FY12E
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FY13E
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Revenues
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1,222,760
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1,516,252
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1,785,137
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1,945,901
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yoy growth (%)
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(9.6)
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24.0
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17.7
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9.0
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Operating profit
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23,791
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34,940
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35,224
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36,070
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OPM (%)
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1.9
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2.3
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2.0
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1.9
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Pre-exceptional PAT
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15,376
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15,467
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13,251
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13,922
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Reported PAT
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15,376
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15,467
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13,251
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13,922
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yoy growth (%)
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108.9
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0.6
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(14.3)
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5.1
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EPS (Rs)
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42.5
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42.8
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36.7
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38.5
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P/E (x)
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16.2
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16.1
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18.8
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17.9
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Price/Book (x)
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1.9
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1.8
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1.7
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1.5
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EV/EBITDA (x)
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19.7
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12.5
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13.2
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13.6
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Debt/Equity (x)
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1.7
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1.3
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1.5
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1.5
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RoE (%)
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12.2
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11.4
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9.1
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8.9
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RoCE (%)
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9.6
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10.0
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9.7
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9.3
| Source: Company, India Infoline Research
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