Stock Analysis – BPCL 3QFY12 Results

Buy Stocks of BPCL on dips for medium term time period. The stock analysis based on BPCL’s 3QFY12 results gives rationale behind this recommendation.

As everybody knows, huge chunk of revenue and profit for BPCL (Bharat Petroleum Corporation Limited) depends on subsidy that Government of India (GOI) allocates to it for petroleum products. This allocation from GOI has increased and due to this, BPCL reported 3QFY12 profit of Rs.3140 crores.

For 4QFY12, BPCL is expected to receive compensation from GOI on account of under-recoveries by downstream companies.

BPCL had reported Gross Refining Margin (GRM) of US $1.6/barrel in previous quarter. In 3QFY12, this GRM has improved to US $3.5/ barrel. It is a big improvement.

BPCL is also involved into E&P (exploration & production) business and it is certainly exciting looking at its prospects. Currently BPCL is involved in E&P in Brazil and Mozambique and it is expected that these activities will see more appraisal and exploration work in FY12.

It is expected that GOI will increase prices of Petrol and Diesel after assembly elections are over in Uttar Pradesh and other states (populist measures by corrupt government to play elections!). This will further help BPCL in improving its bottom line.

BPCL would be one of the better stocks to buy in Petroleum sector. One may buy stocks on dips from current stock price of Rs.659 for medium term. The target stock price over one year could be around Rs.750.

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