Q3FY24 Review: BPCL: Strong refining leads the PAT growth

31 Jan 2024 , 10:55 AM

Analysts at IIFL Securities have upgraded BPCL’s FY24-26 estimated PAT by 12-13% to reflect Year-to-Date performance; operating environment is supportive of recovery in margins, and volume growth. It hopes to kick start construction at Mozambique LNG soon (10% stake, valued at US$1.5 Billion), which clubbed with ₹1.5 Trillion investments in petchem, O&G projects should de-risk earnings in the long run. As such Q3FY24 PAT growth was strong at 73%, on the back of refining performance, and strategy to maximize high margin MS sales. Valuations are cheap at 7x FY25 estimated P/E.

During the earnings call hosted by IIFL, CMD Mr. G Krishnakumar shared: 

• While EV/CNG consumption is set to rise, at least over the next few years, the company expects MS/HSD sales to rise by 5%/2%, respectively
• Nonetheless, the company is investing ₹500 Billion to upgrade refinery capacity by 9% and set up ~2m mT integrated polymer unit at Bina, to eliminate negative margins products
• It is also investing ₹1 Trillion in other projects, including Mozambique LNG, RE, CGDs, marketing infra, etc., which should be completed in phases by 2028
• Construction at Mozambique project should restart by Q2 CY24
• Documentation for rights issue is underway, and details of quantum, timing, pricing would be decided soon; it is well-placed to complete it by FY24.