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Bharat Petroleum Corporation Q1FY23 Review: Weak marketing segment leads to losses

ICICIdirect Research 11 Aug 2022 DISCLAIMER

What's Buzzing:

Bharat Petroleum Corporation (BPCL) reported Q1FY23 results that were sharply lower than our estimates. While GRMs of US$27.5/bbl were broadly in line with estimates, marketing segment was weaker than expected.

Context:

BPCL's topline was up 12.3% QoQ to Rs 138405.8 crore against our estimate of Rs 127691.6 crore. EBITDA loss was at Rs 5901.8 crore against EBITDA of Rs 5834.5 crore in Q4FY22. It was sharply higher estimated EBITDA loss of Rs 1005.9 crore. Subsequently, the company reported net loss of Rs 6290.8 crore against PAT of Rs 2384 crore in Q4FY22 (estimated net loss: Rs 1641.7 crore).

Our Perspective:

The company reported numbers post amalgamation with its subsidiary Bharat Oman Refineries (BORL). While estimates are not comparable on a like-to-like basis, overall numbers were weaker than estimates. Marketing sales were at 11.8 MMT, flat QoQ and crude throughput was 9.7 MMT, down 4.5% QoQ. GRMs of US$27.5/bbl was largely in line with expectations. Profitability of marketing operations was sharply lower than expected as the company did not increase retail prices of petrol & diesel in line with higher crude oil costs. The company reported marketing inventory loss and forex loss of Rs 371 crore and Rs 964.5 crore, respectively, which further impacted profitability during the quarter. Going ahead, on a standalone basis, the company is expected to report higher throughput on account of amalgamation with BORL (BORL refining capacity: 7.8 MMTPA). In the current quarter (Q2FY23E-TD), benchmark Singapore GRMs have dipped QoQ and product cracks (specially petrol cracks) have corrected from peaks witnessed in Q1FY23. Stability in GRMs at higher level and passing on higher crude oil costs to retail customers will be the key for better performance.

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