SHARETIPSINFO >>Research Reports >> BHARAT PETROLEUM CORPORATION
(25-11-2008)
LISTING BSE
CMP Rs 350
52 WEEK HIGH/LOW Rs 560/Rs 206
FACE VALUE Rs10
COMPANY OVERVEIW:
Burmah Oil Refineries Ltd was incorporated in 1952 as a joint venture between Burmah
Oil Company ,UK and Shell Petroleum Company by an agreement with Indian
Government to set up a refinery at Mahul in Mumbai ,which went on stream in 1957. In
1976 the Indian Government natio nalized the petroleum industry and acquired 100% equity
in Burmah Oil Refineries and named it Bharat Refineries Ltd. The named was later
changed to Bharat Petroleum Corporation Ltd (BPCL) in 1977.
BUSINESS UNITS:
Refineries: BPCL currently have Refineries at Mumbai and Kochi wit a capacity of 12
h
million metric tons per annum (MMTPA) and 7.5 million metric tons per annum
(MMTPA) respectively for refining of crude oil. BPCL subsidiary at Numaligarh has a
capacity of 3 million metric tons per annum (MMTPA).
Distribution network: Retail SBU is the face of Bharat Petroleum to the outside world and
is engaged in the retailing of petrol, diesel and kerosene, besides various non-fuel product
and value-added services through its retail network of 6553 retail outlets and 1007
kerosene dealers.
Lubricant: Bharat Petroleum offers a full range of Automotive Engine Oils, Gear Oils,
Transmission Oils, Specialty Oils and Greases. The correct usage of these lubricants of
right quality ensures prolonged and troubled free vehicle operation.
LPG: Bharat petroleum is one of the largest distributor of gas in the country.BPCL
distribute LPG in the name of Bharat Gas.
Industries: Bharat Petroleum caters to the needs of fuels and other Petrochemical .Bharat
Petroleum’s Industrial and Commercial Business unit, commonly known as I & C SBU
was formed. Bharat Petroleum caters to about 8000 Industrial customers spreadacross all
over the country.
Aviation: The aviation business of Bharat Petroleum is integrated business unit engaged in
receiving, storing and delivering Jet fuel into plane to airline customers and marketing of
Aero shell lubricant to aircraft operators.

SUBSIDIARY:
KOCHI REFINERIES: BPCL holds 66.04% stake in the Kochi refineries wit the
h
refining capacity of 7.5 MMTPA.
NUMALIGARH REFINERIES: BPCL holds 62.9% stake in Numaligarh refineries with
refining capacity of 3 MMTPA.
NEW CORPORATE STRUCTURE:
KEY POSITIVE:
The fall in the price of the crude oil by more than 60% in the last 2 month is the main
reason for the stock outperforming the market. We expect further fall in the price of the
crude oil in coming months. We expect Crude oil price to stabilize somewhere near
$30/barrel. Crude oil being the major input, Refinery Company went into huge loss this
fiscal as crude oil price saw sharp increase during the 1st and 2nd quarter. The OPM and
NPM saw sharp decline. Now oil price at around $50/barrel will make these refinery
companies cover their losses.
KEY EVENTS:
BPCL is planning to expand its Kochi refinery by September next year. The expansion cost
will be Rs 325 billion and raise refinery capacity 2 MMTPA to 10 MMTPA.
BPCL has entered into a JV with Shapoorji Pallonji and Nandan Biomatrix to establish a

bio-diesel value chain in Uttar Pradesh by subscribing to 33.33%of equity for amount of Rs
2.7 billion.
KEY RISK:
Change in the Government policy.
Depreciation of rupee will increase the import of raw material.
Any unexpected rise in the priceof the crude oil price.
SHAREHOLDING PATTERN:
PROMOTERS 23232879764.26%
INSTITUTIONS 10882590130.09%
GENERAL
PUBLIC 20387426 5.65%
GRAND TOTAL 361542124100.00%
FINANCIALS:
%YOY
31/03/07 CHG 31/03/08
TOTAL INCOME 98293.4 14.36% 112410.4
EXPENDITURE -94144.2 14.22% -107539
OPERATING
PROFIT 4149.2 17.39% 4871
DEPRECIATION -904.1 42.90% -1292.1
PBIT 3245.1 10.28% 3578.9
INTEREST -477.4 49.74% -714.9

PBT 2767.7 3.47% 2864
TAX -962.2 15.10% -1107.5
PAT 1805.5 -2.70% 1756.5
CHANGE IN TOTAL INCOME: CHANGE IN TOTAL INCOME IS 14.36%.
CHANGE IN OPERATING PROFIT: CHANGE IN OPERATING PROFIT IS
17.39%.

CHANGE IN NET PROFIT: PAT DECREASED BY 2.7%.
COMPARISON OF RESULT Q2FY2009 WITH Q1FY2009:
%QOQ
30/06/08 CHG 30/09/08
TOTAL INCOME 39297.7 -2.92% 38148.73
EXPENDITURE -39791.3 0.05% -39993.6
OPERATING
PROFIT -493.6 -273.70%-1844.91
DEPRECIATION -269.1 -10.09% -241.94
PBIT -762.7 -173.50%-2086.85
INTEREST -301.6 76.90% -533.81
PBT -1064.3 -147% -2620.66
TAX -2.4 92% -4.61
PAT -1066.7 -146% -2625.27
RATIO: YOY CHANGE IN OPM AND NPM
31/03/07 31/03/08
OPM 4.22124 4.333229
NPM 1.836848 1.562578

OPERATING PROFIT MARGIN remained almost flat while slight decline in NET
PROFIT MARGIN is witnessed.
QOQ CHANGE IN OPM AND NPM
30/06/08 30/09/08
OPM -1.25605 -4.8361
NPM -2.71441 -6.88167
A sharp decline in the OPM and NPM is seen the 1st quarter and 2nd quarter of this fiscal.
VALUATION:
BPCL is trading at 6.8X of past year EPS of 48.57.With the significant decrease in the
crude oil price we expect the EPS to rise by about 20% to be near Rs 60.The average PE

multiple of the refinery company is at around 8.So, the fair value of BPCL comes to be
near Rs466.A good appreciatio could be seen from this level.
n
CONCLUSION:
At this price all the negative has been discounted. Nothing could have been worse than this
for refinery companies. Now time has come to reap the benefit. We expect PSU refinery
companies specially BPCL to outperform the broad market. Long term, medium term
investor could take position on this counter. The downside in this counter is very limited.
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