Buy BPCL - Motilal Oswal

BPCL 3QFY11: Below estimates led by lower GRMs and higher under recovery; expect subsidy clarity by end-FY11; Buy

BPCL reported 3QFY11 EBITDA of Rs7.3b; up 17%YoY and down 71%QoQ.

Lower than estimated EBITDA was due to (1) lower GRM and throughput and (2) higher net under recovery at Rs5.5b.

3QFY11 Net Profit stood at Rs1.8b, down 51% YoY and 91% QoQ.

During the 9MFY11 period, BPCL's gross under recovery stood at Rs106b, of which upstream shared Rs35.4b and government shared Rs47.6b.

BPCL has declared 7 discoveries in its overseas blocks in Brazil, Mozambique and Indonesia.

Valuation and View: The stock trades at 9.5x FY12E EPS of Rs61.7 and 1.2x FY12E BV. We expect govt. to spell out the sustainable subsidy sharing formula (at different oil prices) over the next few months and would translate into higher valuations for BPCL. Maintain Buy. Results concall is scheduled for February 10.

Source : Equity Bulls

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