Maintain Buy on Chennai Petroleum Corporation - Motilal Oswal

CHENNAI PETRO 3QFY11: Below est led by lower GRM at US$5.3/bbl (est US$5.5/bbl); Valuations attractive; Maintain Buy

Chennai Petroleum Corporation reported 3QFY11 EBITDA at Rs3.5b (vs est Rs3.7b) up 2% YoY and 36% QoQ. Lower than estimated EBITDA is largely due to lower than estimated GRM of US$5.3/bbl (vs est of US$5.5/bbl).

Reported net profit stood at Rs1.6b down 30% YoY and up 58% QoQ. On the operational front, crude throughput stood at 2.8mmt (in line) up 2% YoY.

CPCL reported GRM of US$5.3/bbl compared to Singapore GRM of US$5.5/bbl. For every, US$1/bbl change in GRM for FY13, EPS changes by ~Rs16 (45%). CPCL's gross debt stands at Rs40b. It has planned a capex of Rs10b in FY13.

We are increasing FY12 EPS estimates by 8% to Rs31.6 led by change in GRM and exchange rate assumptions. For FY13, we assume Singapore GRM at US$5.2/bbl and our EPS stands at Rs34.4. The stock trades at FY13E P/E of 6.5x and EV/EBITDA of 5.5x. Valuations continue to remain attractive compared to peers. Maintain Buy.

Source : Equity Bulls

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