Synopsis:
Jefferies initiates coverage on BPCL with a buy rating and a target price of Rs. 410 apiece, citing strong earnings visibility and attractive valuation, preferring it over HPCL amid higher project risks and excise duty concerns.
During Tuesday’s trading session, shares of a company involved in refining crude oil and marketing petroleum products are in focus on the stock exchanges, after global brokerage firm Jefferies maintained a “buy” rating on the stock, with a potential upside of about 31 percent.
With a market capitalisation of Rs. 1.35 lakh crores, the shares of Bharat Petroleum Corporation Limited closed in the red at Rs. 312.25 on BSE, down by around 1 percent, as compared to its previous closing price of Rs. 315.7. The stock has delivered negative returns of nearly 11 percent in the last one year, and has fallen by over 6 percent in a month.
Brokerage Target & Outlook
Global brokerage firm Jefferies has initiated coverage on Bharat Petroleum Corporation Limited (BPCL) with a ‘buy’ rating and a target price of Rs. 410 per share, representing a potential upside of nearly 31 percent from its Tuesday’s closing price. The brokerage highlighted that BPCL shares have corrected nearly 10 percent over the past year, even though the company’s earnings outlook remains firm.
It further observed that BPCL is currently valued at a forward price-to-book (P/B) multiple similar to Hindustan Petroleum Corporation Ltd. (HPCL). However, investor concerns regarding BPCL’s upcoming cycle of elevated capital expenditure have weighed on its valuation.
In comparison, Jefferies flagged higher risks to HPCL’s earnings from large-scale projects that typically take 3-5 years to stabilise post-commissioning, along with potential vulnerability to any increase in excise duties by the government.
Taking these factors into account, Jefferies expressed a preference for BPCL over HPCL, citing stronger earnings visibility and a more attractive valuation as the basis for its positive outlook.
Financials & More
BPCL reported a marginal decline in revenue from operations, experiencing a year-on-year fall of nearly 0.5 percent, from Rs. 113,095 crores in Q1 FY25 to Rs. 112,551 crores in Q1 FY26.
In contrast, the company’s net profit increased during the same period from Rs. 2,842 crores to Rs. 6,839 crores, representing an impressive rise of nearly 141 percent YoY.
The company’s debt-to-equity ratio stood at 0.44, with a current ratio of 0.86. Net profit margin was at 5.28 percent, while the operating margin was reported at 6.32 percent. Additionally, its dividend yield stood at 3.27 percent.
BPCL’s total segment revenue reached Rs. 1,29,614.7 crore, with the Downstream Petroleum segment contributing Rs. 1,29,578 crore (99.97 percent) and the Exploration & Production (E&P) of Hydrocarbons business adding Rs. 36.8 crore (0.03 percent)
Bharat Petroleum Corporation Limited is engaged in the business of refining crude oil and marketing petroleum products. It has refineries in Mumbai, Kochi and Bina, LPG bottling plants and Lube blending plants at various locations. The company’s marketing infrastructure includes a vast network of Installations, depots, retail outlets, aviation fueling stations and LPG distributors.
Written by Shivani Singh
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