Maintain 'buy' on BPCL - TP Rs.735 - Geojit BNP Paribas Financial Services Limited

- BPCL reported profit of Rs.1310 crore for FY12 as the government ensured that oil marketing companies (OMCs) will be fully compensated for the losses incurred from selling fuel at below market prices.

- Bina began to get traction with gross refining margin (GRM) of USD 9-11 per barrel.

- Interest expenses remain very high on account of delays in government payout.

- The company reported forex gains of Rs.800 crore. This gain is expected to be reversed in 1QFY13 because of weak rupee.

- Bina reported strong performance with GRM of USD 11 for the fourth quarter at 50-60% capacity utilization.

- Forex gains and strong performance of Bina have helped the company to report better results.

- Capex of Rs.45 -55 billion is expected, which includes capacity expansion of Kochi unit from 9.5 million tons to 15.5million tons. Rs.15-16 billion will be used for exploration and production (E&P)

- Reiterate "buy" with a target price of Rs.735. This is without adjusting for the latest Golfinho discovery.

- Near term weakness is anticipated for OMCs in general and BPCL in particular as the stock has already outperformed year to date and uncertainty prevails on diesel price hike.

- Any price fall from the current level would be an attractive entry point.

Source : Equity Bulls

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