Bharat Petroleum Corporation Ltd (BPCL), reported 18.6% y-o-y fall in net sales to Rs265 billion. Market sales at 7.1 million tonnes (highest ever quarterly volumes) were higher by 1.7% y-o-y but export sales were down 63% y-o-y to 0.25 million tonnes.
Lower revenues were primarily on account of decline in product prices in line with correction in crude oil prices.
We had forecasted a gross under recovery of Rs8.2 billion for BPCL in Q4 FY09, which we had assumed would be shared by Rs23.3 billion by bonds and none by upstream companies.
However, bonds provisioning was lower at Rs20.7 billion but upstream companies shelved out discounts to the tune of Rs2.4 billion.
On a y-o-y basis, bond provisioning was lower by 48%, while upstream discounts declined by 90%.
The company reported an operating profit of Rs41.7 billion as compared to Rs15.5 billion in Q3 FY09 and Rs8.6 billion in Q4 FY08. OPM was at 15.7%, up 13pts y-o-y and 11ppts q-o-q.
The improved performance was on back of sharp decline in gross under recoveries following fall in crude oil prices.
Furthermore, GRMs for Mumbai refinery improved from US$3.3/bbl in Q3 FY09 to US$5.2/bbl in Q4 FY09. Kochi refinery recorded a GRM of US$4.1/bbl against a –ve US$1.6/bbl in Q3 FY09.
With contribution from bonds and upstream discounts considerably more than the gross under recoveries in the quarter, operational performance was at its best in Q4 FY09.
During Q4 FY09, BPCL reported more than four fold yoy jump in other income to Rs5.9bn. However, the gains were partially marred on account of over four fold jump in interest costs.
With delay in receipt of bonds, BPCL had to borrow at higher interest rates to meet its working capital requirements.
Better subsidy sharing pattern coupled with higher other income translated into a PAT of Rs36.3 billion in Q4 FY09 as against Rs584 million in Q4 FY08 and Rs8 billion in Q3 FY09.
Since the re-appointment of Congress-led UPA government at the centre, speculations have been built around significant de-regulation measures for the oil and gas sector. Recent comments from the oil ministry have also been favorable.
Consequently, sentiments have turned positive for the OMCs and these stocks have outperformed the broader indices substantially.
Considering historic peak valuations for these stocks, upsides in stock prices cannot be ruled out even from current levels.