Brokerage published the visibility and favorable valuation of BPCL’s strong earnings while warning the risks against Hindustan Petroleum Corporation Limited (HPCL).
“BPCL stock has improved by 10% in the past year, as its earnings are firm with crude under US $ 70,” Jefferies said in its note. Brokerage said that BPCL is currently trading on P/B as HPCL, but it has noted the risk of risk for HPCL earnings from new projects, which usually takes three to five years to freeze after commissioning, and with any possible excise duty increase.
On the contrary, Jefferies believe that BPCL provides more stability in earnings. “Choose BPCL on the visibility and convenient valn of strong earnings,” the report states.
Jefferies observed that the view of downstream earnings for the OMC is well supported by crude price trends.
“Oil Price is estimated to increase by only 0.68 MbPD in CY 25 (IEA), with a growing supply by 2.2 MbPD in OPEC+ supply between April -25 and Sept -25. CY 25 (IEA), with the expectation of 1.5Mbpd in 4CQY25, OMCES NIS.
Marketing margins were also noted to be better trending than the history of the history. Jefferies said, “Marketing margins on diesel/petrol at Rs. 8.1/11.2 per LTR in YTDFY 26 are moving significantly from the ideal levels,” Jefferies added that there is a positive surprise in our/unanimous estimate in FY26E, even if there is no increase in excise duty.
Brokerage has underlined that this is well -known for BPCL earnings above HPCL, as HPCL is more susceptible to duty changes.
Jeffrey pointed that HPCL’s profitability was likely to lose weight by its ongoing project expansion.
“HPCL earnings can be pulled for a few years by the increase in complications in Vizag and the onset of the long -term earnings to stabilize the performance of OMC in the past or to stabilize the complexity of OMC in the past.” “
Brokerage led to past case studies to illuminate new refinery commissioning earnings. It noted that BPCL B’s refinery, with Nelson complexity of 11.8, reported the PBT loss for the first four years after its commissioning in FY 12, with Rs. 37.5 billion was accumulated.
Similarly, the paradip refinery of IOCL, with 10.8 Nelson complexity, was the most complex of its nine refineries, but reported the lower GRM compared to the rest of the IOCL network for its first five years, pulling profits.
BPCL’s Kochi Refinery reached 10.9 with Nelson complexity in FY 18, which also undershers the GRM of Mumbai Refinery for its first three years. Jefferies used these examples to cope with HPCL’s risks on its large -scale expansion.
On the policy front, Jefferies flagged the recent support development. “The RS300BN LPG subsidy return recently approved by the government should increase earnings on FY 26-27, improve the book value of equity on the balance sheet and reduce debt,” the government said.
From the point of view of the valuation, Jefferies noted that BPCL stock is improved by about 10% in the past year and is currently trading at 1.4x forward P/B corresponding to HPCL. Brokerage underlines that unlike the past, HPCL does not command any premium.
“The current BPCL’s current discount on 55% on FWD P/B is suitable with LT AVG of 31%,” the report states. Jefferies at 1.8x Sep -26P/B at Rs. Maintain by BP Call on BPCL with a target of 410, 1.1x Sep -26P/B at Rs. Purchase on IOCL with a price target of 160, and 1.3x on SEP -26P/B for Rs. Underperform on HPCL with a price target of 340.
Brokerage, however, warned of potential damage triggers. The main risks of “rise in crude prices, any increase in excise duties on Auto toe fuel, big capex commitment to the new Energy”, say.
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