BPCL - Demanding Valuation: HDFC Securities

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HDFC Securities Institutional Equities

The Bharat Petroleum Corporation Ltd. stock rallied ~33% and outperformed the Sensex by ~22% over the last six months. However, we believe the current market price is still factoring in very optimistic earnings growth on the back of a very strong FY24.

With crude oil prices rising by ~5% from average prices seen in Q4 FY24 and rising ~12% to over $86/barrel of oil over the last month, we expect this to adversely impact BPCL’s marketing segment profitability, going ahead.

Additionally, with weaker-than-expected global demand for transportation fuels and increased refined product supplies, we reiterate our stance of refining margins moderating from higher-than-average transportation fuel crack spreads seen in FY24, which should impact the contribution from its refining segment too.

Therefore, we maintain our Reduce rating with a target price of Rs 275/share.

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HDFC Securities Institutional Equities BPCL - Update.pdf

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