Buy This Petroleum Stock For 34% Return, In 1 Year: Emkay Global

Renowned brokerage firm Emkay Global recently recommended investors to buy the stocks of Bharat Petroleum Corporation Limited (BPCL) for 34.70% upside. BPCL has fared the best in marketing and auto-fuel sales in Q3.

Target Price

The Current Market Price (CMP) of BPCL is Rs. 382. Emkay Global has estimated a Target Price for the stock at Rs. 515. The company is expected to offer a 34.70% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 382
Target Price	Rs. 515
1 year return	34.70%

Company performance

BPCL posted Q3FY22 standalone EBITDA/PAT of Rs. 42.5bn/Rs. 24.6bn, down 5%/9% QoQ. EBITDA missed our estimate by 27% due to lower marketing income, which was affected by a one-time inventory loss arising from a cut in auto-fuel excise duty in Nov'21. Q3FY22 saw BPCL clocking the highest growth among OMCs in petrol/diesel sales. The market share improved by 0.48%/0.33% to 29%+, and its demand is steady despite Omicron's impact. Refining volumes rose 11% QoQ to 8.0mmt, and refinery utilization was healthy at 116%. Petrol/diesel sales volumes were up 4%/down 3% YoY. Q3 Capex was Rs. 27.9bn.

Comments by Emkay Global

About the stock, Emkay Global said, "We value BPCL on a SOTP basis at 6.3x blended Mar'24E EV/EBITDA, BORL at 5x and investments with a 30% holdco discount. Key risks are adverse petroleum prices/margins/currency, project delays, and disinvestment uncertainties. We raise FY22/FY23/FY24 EPS estimates by 7%/3%/1%, building in higher GRMs, and roll over-valuations from Dec'23E to Mar'24E. The company's petrol/diesel sales volumes were up 4%/down 3% YoY. Q3 Capex was Rs. 27.9bn, while the O/S subsidy was Rs2.0bn." Additionally, the company board declared a second interim dividend of Rs. 5/sh.

About the company

Bharat Petroleum, India's 'best performing' Maharatna Public Sector Undertaking, is a Fortune 500 oil refining, exploration, and marketing conglomerate. The first drive-through fuel station in India was built in 1928. From then, their pan country network of Fuel Station has crossed the 16,000 mark, with approximately 1 Crore vehicles fueling up every day. Bharat Petroleum also launched several iconic initiatives, such as Pure for Sure, Premium Petrol & Diesel, Urban, and Transport Loyalty Programme, Convenience Store In & Out, etc;. to transform the face of fuel retailing in India.

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Disclaimer

The above stock was picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.