Buy BPCL, target price Rs 480: Emkay Global

Emkay Global has given a buy rating to BPCL with a target price of Rs 480. The share price moved up by 4.14 per cent from its previous close of Rs 394.05. The stock’s last traded price is Rs 417.65 .

As the July 31 deadline for the submission of EoI approaches, media reports indicate that global energy majors, including RIL has shown interest in buying out BPCL. As per deal advisors, most bids would come at Rs 1.2 trn market cap vs. Rs850bn now.

RIL can be a serious contender being mostly net debt free now and possibly include BP also as a partner. Other players are Aramco, ADNOC, Rosneft and ExxonMobil, as per the reports. With RIL deal not progressing, Aramco may now look at BPCL aggressively.

Financials
For the quarter ended 31-03-2020, the company reported a Consolidated sales of Rs 68997.83 Crore, down -7.95 % from last quarter Sales of Rs 74959.18 Crore and down -7.22 % from last year same quarter Sales of Rs 74367.18 Crore. Company reported net profit after tax of Rs -2082.60 Crore in latest quarter.

Investment Rationale
The brokerage said that the progress on BPCL’s sale is positive for OMCs in terms of deepening deregulation and profitability outlook. Given the tight fiscal situation, disinvestment would be of utmost importance to the government this year. The brokerage retains Buy/ go OW in EAP, with a TP of Rs 480.

Promoter/FII Holdings
Promoters held 53 per cent stake in the company as of March 31, 2020, while FIIs held 12.3 per cent, DIIs 19.6 per cent and public and others 15.1 per cent.