Result Update: Chennai Petroleum Corporation Ltd (CPCL) - ACCUMULATE - TP Rs.455 - Kotak

- CPCL's Q4FY17 PAT decreased by 41% qoq (base effect) to Rs.1.7 bn reflecting lower crude throughput, one-time investment write-offs, higher operating expenses (includes one-time charge) and higher depreciation/interest expense. CPCL has reported lower throughput of 2.09 mmt, resulting in mere 69% capacity utilization in Q4FY17. The Company has declared a dividend of Rs.21/share, resulting in 5% dividend yield.

- Indian Oil Corporation's Chairman has reiterated that merger of CPCL with IOC (parent company) is inevitable We expect news flow on merger will keep the stock in focus. However, the merger is subject to couple of approvals and it is difficult to put a timeline for the same.

- We are introducing FY19 estimates We expect CPCL to report an EPS of Rs.64.3/share in FY18E and an EPS of Rs.70.1 in FY19E. Higher earnings will be supported by higher GRMs and improvement in operational efficiency. At CMP, we believe that the stock is fairly valued at a PE of 5.94x FY19E earnings. Due to limit upside, we maintain ACCUMULATE on the stock with a revised price target of Rs.455. We have valued CPCL based on PE multiple of 6.5x FY19 (target PE), which is at a significant discount to its peers.

Shares of CHENNAI PETROLEUM CORPORATION LTD. was last trading in BSE at Rs.395.85 as compared to the previous close of Rs. 394.4. The total number of shares traded during the day was 68343 in over 1554 trades.

The stock hit an intraday high of Rs. 402.35 and intraday low of 393.1. The net turnover during the day was Rs. 27190545.

Source : Equity Bulls

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