Shares of BPCL: 315 or 530 rupees? What the market thinks after Q4 earnings growth

Share price targets for Bharat Petroleum Corporation Limited (BPCL) after the oil marketing company’s results for the March quarter show that the counter could go up by up to 44%. Still, many brokerages don’t think the stock has much room to go up. A few brokerages kept their price targets between Rs 315 and Rs 530. However, brokerages like Motilal Oswal Securities, Emkay Global, Morgan Stanley, BofA Securities, and Investec suggested price targets below Rs 400. Monday, the scrip was worth Rs 361.50.

While BPCL’s gross refining margin (GRM), at $20.6 per barrel, was higher than Motilal Oswal’s forecast of $17 per barrel, the implied marketing margin, at Rs 2.9 per litre, was lower than the firm’s prediction of Rs 4.5 per litre.

As a result of the drop in crude oil price to Rs 6,478 crore, OMCs are expected to generate gross margins of Rs 9.1 on petrol and Rs 11.6 on diesel in the June quarter, which will help BPCL’s marketing performance improve further in the coming quarter. “There is no change to the BPCL divestment plan at this time,” it said, putting the stock’s value at Rs 360.

For the March quarter, BPCL’s net profit rose to Rs 6,478 crore, which is more than double what it was for the same time last year. This was due to a recovery in fuel selling margins and better refining margins. The rise in net profit in the fourth quarter helped the company make a net profit of Rs 1,870.10 crore for FY23. This made up for the losses the company had to take in the first half of the financial year when it kept petrol, diesel, and LPG prices the same even though costs were going up.

Emkay Global said that it has slightly raised its target multiple for ONGC to 5.6 times FY25E EV/Ebitda and changed its goal by 13% to Rs 395 per share. Even though the outlook for earnings is stable, there are risks to the whole system, the brokerage said, citing BPCL’s new Rs 50,000 crore capital expenditure plan and the upcoming national elections. The brokerage kept its Hold rating on the stock.

Nuvama Institutional Equities said that BPCL’s running cash flow (before working capital) fell by 36% year over year to Rs 13,400 crore because operations were slowing down. It said that GRMs will stay low in the near future because of fears of a slowdown.

“However, we stick to our theory of the Golden refining age and expect GRMs to be worth more than $10 after 2024. We raised our estimates for Ebitda for FY24 and FY25 by 5% each, and our target price went up by 5% to Rs 442. This was based on strong growth possibilities, the report said.

Jefferies thinks the stock is worth Rs 445, Morgan Stanley thinks it’s worth Rs 390, and Investec thinks it’s worth Rs 375. BofA Securities, on the other hand, wants the stock to reach Rs 315.

“When export taxes are taken into account (we guess $9 per barrel), the realised GRM is probably around USD 16.7/bbl. Even though GRMs have slowed down recently, marketing margins for petrol, diesel and LPG have more than made up for the slowing down and strongly rebounded. We still have a BUY rating and a target price of Rs 529 (previously INR 537). This is because we moved our goal from 1HFY25 to FY25 and cut the EV/EBITDA multiple from 6 to 5.75.



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