Monthly Call

Bharat Petroleum
CMP: 315.05
Target 1: 330
Target 2: 336
Current Quote of Bharat Petroleum

Bharat Petroleum Corporation Ltd (BPCL) improved its gross refining margins (GRMs) on a Y-o-Y basis during the June 2007 quarter, which helped it offset mounting under-recoveries in retail sales of auto fuels and kerosene due to surging international crude prices. Operating profit (excluding other income) was Rs 206 crore in Q1FY08 compared with an operating loss of Rs 260.9 crore the previous year, while net sales grew 5.1% to Rs 23,869.4 crore. Meanwhile, in its refining division, crude throughput amounted to 5.15 million tonnes during the June 2007 quarter compared with 4.88 million tonne a year earlier. Going forward, refining margins are expected to remain strong, in tune with the global trend. Further, BPCL, like other oil marketing companies, is expected to receive oil bonds from the central government and that should help improve its financial health. At the current price of Rs 315, the stock trades at over 7x estimated FY08 earnings.

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