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Informist, Saturday, Apr. 26, 2025

 

By Sunil Raghu

 

AHMEDABAD – Higher output and better marketing margins may fail to offset a fall in refining margins and inventory losses that state-owned Bharat Petroleum Corp. Ltd. is likely to have seen in the March quarter. The state-owned oil refining and marketing company's revenue and net profit for the March quarter are expected to plummet. Volatility in crude oil prices could lead to lower margins on oil products and depreciation of the rupee in the March quarter could add to the earnings woes, according to analysts tracking the company.

 

The oil marketing company is expected to report a 37% on-year fall in its net profit for the March quarter at INR 26.6 billion, according to the average of the estimates of nine brokerages. The estimates for net profit range from INR 40.1 billion by Nirmal Bang Equities Pvt. Ltd. to a low of INR 14.1 billion by Prabhudas Lilladher Pvt. Ltd.

 

The state-owned refiner's revenue is expected to have fallen 4.5% on year to INR 1.1 trillion during the quarter. The highest and the lowest projections for this metric were INR 1.3 trillion by JM Financial Institutional Securities Pvt. Ltd. and INR 957.3 billion by Motilal Oswal Financial Services Ltd., respectively. 

 

For the December quarter, BPCL had clocked a net profit of INR 46.5 billion on revenue of INR 1.13 trillion. In the year-ago quarter, the company had reported a net profit of INR 42.2 billion on revenue of INR 1.2 trillion.

 

Cash profit from operations or earnings before interest, tax, depreciation and amortisation, is seen at INR 54.1 billion for the March quarter, according to the average of the estimates of nine brokerages.

 

The company will announce its March quarter earnings on Tuesday. 

 

Sequentially, oil marketing companies are expected to report a fall in their gross refining margins for the quarter, analysts said. Gross refining margin, or GRM, is the difference between the price of crude oil per barrel and the total value of petroleum products produced by a refinery from that oil. It is a key indicator of a refinery's efficiency and profitability.

 

The average benchmark Singapore gross refining margin was at $3.2 per barrel in Jan-Mar, down 58% on year and 36% lower than the previous quarter's $5 per barrel, with a fall in global product cracks of gasoline and aviation turbine fuel, multiple analyst reports show. Singapore GRMs are generally used as benchmarks to assess the refining margins of Indian oil companies. Product crack is the difference between the price of a barrel of crude oil and the price of a barrel of specified product. A higher product crack means refiners make more money when processing crude oil into refined products. 

 

Prabhudas Lilladher Pvt Ltd., which estimated the lowest net profit for BPCL, has advised investors to 'hold' the stock of this public sector oil company, with a target of INR 261 per share. On Friday, the company's shares ended at INR 295.70 per share on the National Stock Exchange, down 2.1% for the day, but up 6.5% from INR 277.60 on Jan 22, the day BPCL announced its Oct-Dec earnings.

 

The research firm expects BPCL to report weak operating results due to weaker marketing margins. It estimates gross refining margins for BPCL at $7.2 per barrel and blended gross marketing margins of INR 3.8 per litre.

 

Kotak Institutional Equities also said a 4-5% quarter-on-quarter increase in crude costs in rupee terms will impact earnings and reported GRMs for oil companies. Oil companies could not pass on the higher costs to their retail customers, which impacted their marketing margins. Kotak has given a 'sell' recommendation for this public sector oil company, and said the fair value of stock is INR 220 per share.

 

JM Financial Institutional Securities Pvt. Ltd. and Motilal Oswal also expect BPCL's GRMs to fall. Motilal Oswal sees the GRM at $5 per barrel, compared to $7.4 per barrel in the December quarter. JM Financial expects BPCL to record a product inventory loss of INR 1.18 billion for the quarter.

 

JM Financial expects BPCL's crude throughput in the March quarter to be 10.4 million tonnes and marketing sales volumes to be 13.8 million tonnes. Motilal Oswal expects crude throughput to rise 8% on quarter to 10.3 million tonnes and marketing sales volumes to increase 4% on year and 2% on quarter to 13.7 million tonnes. In Oct-Dec, the company's throughput was impacted by a planned shutdown of its Bina refinery for 15 days and of its Kochi refinery for up to 30 days.

 

Analysts are keen for updates on the expansion of Bina refinery and the status of the construction plan for the Andhra refinery and petrochemical complex. BPCL has already announced its plans for a 9 million tonnes per annum greenfield refinery and a petrochemicals complex in Andhra Pradesh at a cost of INR 600 billion. It is also looking to expand its Bina facility at a cost of nearly INR 500 billion.

 

Following are the Jan-Mar earnings estimates for BPCL based on reports from nine brokerage firms in descending order by the estimate of net profit:

 

Brokerage	Net sales (in INR million)	Net profit (in INR million)	EBITDA (in INR million)
Nirmal Bang Equities Pvt Ltd	1,126,134	40,997	78,715
ICICI Securities	1,172,900	30,000	55,000
JM Financial Institutional Securities Pvt Ltd	1,339,067	29,975	58,357
Equirus Securities Pvt Ltd	1,095,986	26,616	57,998
Motilal Oswal Financial Services Ltd	957,300	26,500	53,500
Nomura Equity Research	1,097,900	24,600	50,000
Kotak Institutional Equities	1,067,651	24,373	50,101
Emkay Global Financial Services Ltd	1,154,680	22,195	47,395
Prabhudas Lilladher Pvt Ltd	1,010,100	14,100	35,600
Average	1,113,514.22	26,595.11	54.074

 

End

 

Edited by Avishek Dutta

 

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