The share price of Bharat Petroleum Corporation Ltd (BPCL)

BPCL

The share price of Bharat Petroleum Corporation Ltd (BPCL), a state-owned oil refining and marketing company, reached a 52-week high of Rs 687.95 on Tuesday, gaining over 6 percent in a single day. The stock has been on a rally since the announcement of its third-quarter results last week, which showed a net profit of Rs 2,777 crore, beating analysts’ expectations. The company also declared an interim dividend of Rs 16 per share.

 

BPCL share price gains more than 5% in morning trades to scale 52 week highs

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According to Jefferies, a global investment banking firm, there are seven key reasons why BPCL’s stock can rise further by more than 30 percent in the next 12 months. These are:

  • The company’s refining margins are expected to improve in the fourth quarter, driven by higher crude throughput and better product cracks.
  • The company’s marketing margins are likely to remain stable, as the government has allowed oil companies to pass on the increase in global oil prices to consumers.
  • The company’s stake sale in Numaligarh Refinery Ltd (NRL) is expected to be completed by March 2024, which will unlock value for BPCL and reduce its debt.
  • The company’s divestment of its 61.65 percent stake by the government is also expected to be completed by June 2024, which will lead to a re-rating of the stock, as the new buyer may pay a premium for the control and synergies.
  • The company’s investment in upstream assets, such as Mozambique gas project and Bharat Oman Refineries Ltd (BORL), will start generating cash flows in the next few years, which will enhance its earnings and valuation.
  • The company’s expansion and modernization of its refineries, such as Kochi and Mumbai, will increase its capacity and complexity, which will improve its product mix and margins.
  • The company’s focus on new businesses, such as renewable energy, biofuels, electric vehicles, and gas distribution, will diversify its revenue streams and create long-term growth opportunities.
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Jefferies has given a buy rating to BPCL’s stock, with a target price of Rs 900, implying a potential upside of 31 percent from the current level. The firm believes that BPCL is the best play on India’s oil sector, given its strong fundamentals, attractive valuation, and multiple catalysts.

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Source : mint

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