BPCL Q4 Results Review: Profit Misses Estimates Due To Lower Refining Margin

Bharat Petroleum Corp.'s fourth-quarter profit rose but missed analysts' estimates as narrowing Russian crude oil discounts impacted the refinery's gross refining margin, brokerages said.

The oil refiner's net profit rose 24.34% quarter-on-quarter to Rs 4,224 crore in the quarter ended March 2024, according to an exchange filing. Analysts polled by Bloomberg estimated net profit at Rs 5,342 crore for the quarter.

The decline in the refining segment due to narrowing Russian crude oil discounts caused BPCL to miss analysts' estimates, Jefferies said in a note.

Jefferies has maintained a 'buy' on the stock, but cut the target price to Rs 730 apiece from Rs 890 apiece earlier. BPCL has posted Ebitda 30% below the brokerages' estimates.

Nevertheless, Jefferies has raised BPCL's earnings estimate by 7% and 14% for FY25 and FY26, citing better profitability in FY25.

According to Motilal Oswal Financial Services, BPCL's net profit number came below their estimate of Rs 6,360 crore for the quarter, the brokerage said in a report. BPCL missed the net profit estimate due to a lower refining margin and an impairment cost of Rs 1,800 crore during the quarter, according to the brokerage. It invested in Bharat PetroResources Ltd. due to a change in its prospectus blocks, Motilal Oswal said.

The brokerage did not initiate any upgrade of the stock rating or its target price. Motilal Oswal has a 'neutral' rating on BPCL with a target price of Rs 620 apiece.

• Revenue up 1.62% at Rs 1,16 lakh crore. (Bloomberg estimate: Rs 1.21 lakh crore).

• Ebitda up 47.97% at Rs 9,213 crore. (Bloomberg estimate: Rs 8766 crore).

• Margin up 251 bps at 7.9%. (Bloomberg estimate: 7.3%).

• Net profit up 24.34% at Rs 4224 crore. (Bloomberg estimate: Rs 5,342 crore).

• Board recommended final dividend of Rs 21 per share.

• Bonus issue in the ratio of 1:1.

• Note: Exceptional item of Rs 1,798 crore.

• Jefferies maintained a 'buy' on Bharat Petroleum Corp. and cut its target to Rs 730, which implied a 23% upside from Thursday's closing price.

• Q4 Ebitda was 30% below Jefferies estimates.

• Q4 miss driven by weaker refining segment

• Lower GRMs on narrowing Russian crude discounts

• Diesel/petrol marketing margins at Rs 3/7.6 per litre

• Expect better profitability among peers in FY25/26.

• Raise FY25/26 earnings by 7%/14%.

• The brokerage maintained a 'neutral' rating and a target price of Rs 620, which implied a 4.7% upside from the current market price.

• BPCL reported GRM at $12.5 per barrel, less than $17.1 per barrel, Motilal Oswal estimated for January-March.

• The oil refiner's Ebitda margin also came below the brokerage's estimates due to low refining margins.

• Its net profit also came below Motilal Oswal's estimate due to an impairment cost of Rs 1,800 crore during the fourth quarter.

• The impairment cost incurred due to investment in its subsidiary, Bharat PetroResources Ltd., was due to a change in its prospectus blocks. The accumulated impairment loss of BPCL in the investment is Rs 5,200 crore as of March 31.

• Its marketing volume, keeping aside exports, came in line with the brokerages' estimates.

• BPCL's throughput was in line with Motilal Oswal's estimates.

Shares of the company rose as much as 5.03% to Rs 621.95 apiece, the highest level since May 9. It was trading 3.39% higher at Rs 612.20 apiece, as of 10:18 a.m. This compares to a 0.77% advance in the NSE Nifty 50 Index.

The stock has risen 62.84% in last 12 months. Total traded volume so far in the day stood at 6.1 times its 30-day average. The relative strength index was at 50.70.

Out of 33 analysts tracking the company, 19 maintain a 'buy' rating, five recommend a 'hold,' and nine suggest a 'sell', according to Bloomberg data. The average 12-month consensus price target implies an upside of 5.6%.