Strong Q4 performance, large dividend boost BPCL investors’ sentiments

BPCL

NEW DELHI : A strong Q4 performance by Bharat Petroleum Corporation Ltd (BPCL) led by inventory gains, and a handsome dividend payout announcement drove its stock prices. The stock gained more than 3% in early morning trades, touching 52-week highs on Thursday.

The company rewarded investors with a large payout of ?58 a share as dividend. This was in addition to the dividend of ?21 per share announced earlier during the year, taking total dividend payout to about ?79 a share. The dividend payout translates to more than 16% dividend yield for FY21 at the price the stock is trading at. The company has paid proceeds from treasury stock sale and Numaligarh refinery Ltd (NRL) stake sale as a dividend.

The company had completed the sale of its entire 61.65% stake in Numaligarh Refinery Ltd (NRL) for about ?9,876 crore to a consortium of Oil India and Engineers India, and the government of Assam. Also, it had sold treasury shares, that is BPCL equity shares held by the BPCL Trust, for about ?5,510 crore.

As both developments are in the direction of paving the way for BPCL privatization, the street will be watchful of further progress on this front.

Meanwhile, the company’s Q4 financial performance, too, remained strong. Both marketing margins and refining margins reported by the company were ahead of expectations. The inventory gains (carrying over lower-priced inventory in rising crude oil price environment) benefited the company during Q4.

BPCL’s reported marketing margin stood at ?6.1 per litre, which were higher than estimates of ?4 per litre, said analysts at Motilal Oswal Financial Services Ltd (MOFSL). The marketing sales volumes, too, were 7% higher than MOFSL estimate at 11.2 million metric tonnes (up 4% year-on-year).

The reported gross refining margins, or GRM, at $6.6 per barrel came ahead of estimates ($4.5 by MOFSL). The same was boosted by an inventory gain of about $4.2 per litre. Analysts at Jefferies India Private Limited said the inventory gain of $4.2 was much higher than their estimates of $2 per litre.

The company’s forward outlook also remains decent with benchmark refining margins improving gradually. Marketing profitability is also to stay firm with retail price hikes continuing in accordance with crude oil prices. The overhang of any government intervention on fuel pricing has also cleared ou with completion of state elections. Volume concerns, however, remain as lockdowns led by the spread of the pandemic are expected to impact auto fuel demand.

Analysts at Jefferies India Pvt. Limited have cut marketing volume estimates by 9%/8% for FY22/23 to factor in covid-related restrictions. They have cut FY22/23 Ebitda estimates, too, by 8%/5% respectively. However, earnings per share is still expected to rise with the company shifting to a lower tax regime.

The street, nevertheless, will watch progress on BPCL privatization, and stock performance will hinge on it, say analysts.

News source:- Livemint

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