Target: ₹240
CMP: ₹261
A recent meeting with the management of Bharat Petroleum Corporation Ltd (BPCL) revealed some key insights. The proportion of Russian crude in the refining mix is expected to decrease to about 24 per cent by March 2025, down from the current 35-40 per cent. The company remains optimistic about positive developments in Mozambique in the near future, with gas supply set to commence in FY29. Additionally, BPCL is targeting an FY28 CGD EBITDA of ₹4,000 crore.
Although only ₹6,100 crore has been approved for the Andhra Pradesh refinery project, there is a possibility of incurring another ₹95,000 crore in capex. The ongoing ₹49,000 crore Bina refinery expansion is progressing, with the majority of spending scheduled for FY26/FY27.
Currently, BPCL is trading at a 1-year forward valuation of 1.3x P/B, in line with the mean -1 SD. It is now on par with HPCL on a 1-year forward P/B basis, compared to its historical premium of 50 per cent.
While the valuation seems reasonable and the company continues to deliver strong marketing performance, concerns linger over a subdued mid-term refining outlook. Our FY26E/FY27E PAT are 17/18 per cent sensitive to every $1/bbl change in GRM, and the commencement of a new capex cycle adds to these worries. Therefore, we reiterate our Neutral rating with an SoTP-based valuation of ₹240/share
