Target: ₹415

CMP: ₹337.80

BPCL’s Q1-FY25 results exhibit a weak financial performance where the integrated margins were lower than our expectations. The EBITDA and Adj. PAT, stood at ₹5,650 crore and ₹3,010 crore, respectively. The core GRM at $6.6/bbl was strong while and the market share in diesel and motor spirits highlight the company’s operational prowess.

BPCL’s strategic reduction in debt, annual capex target of ₹13,000 crore, and enhanced refining efficiency position it as a compelling investment, reflecting a positive outlook for sustained growth.

BPCL has ₹1,990 crore and ₹2,420 crore sensitivity to a change of ₹0.5/ltr and $1/bbl, respectively. An expectation of dividend of 4.3/4.3 per cent FY25/26 would be key for shareholders. The BV/share for FY25/26 is at ₹187/199 and the debt:equity is least amongst OMCs at 0.3x for FY25/26.

At CMP, the stock trades at 7.7x/7.5x FY25e/26 EV/EBITDA and 1.7x/1.6x P/BV (excl. investments, trades at 6.4x/6.3x FY25/26 EV/EBITDA and 1.4x/1.3x P/BV). We maintain a Buy rating with a target price of ₹415 valuing it on a sum-of-parts basis (core business at 8x EV/EBITDA and investments at ₹64).