First Read Bharat Petroleum: Refining outperformance and inventory gains kept losses in check

Research evidence excerpt

First Read Bharat Petroleum: Refining outperformance and inventory gains kept losses in check

Forecast returns

Forecast price appreciation 16.1%

Forecast dividend yield 5.3%

Forecast stock return 21.3%

Market return assumption 12.0%

Forecast excess return 9.4%

Company Description

Bharat Petroleum (BPCL) is India's second-largest oil marketing company by capacity, with the

government holding a 52.98% stake. In FY20, it had a domestic market share of 20%

(domestic sales volume of 43.1mmt), with turnover of Rs3.3trn. It has three strategically

located refineries across India (total capacity of 35.3mmtpa) and a retail reach of more than

18,000 retail outlets, supported by cross-country crude and product pipelines. Via its

associates/JVs, BPCL has interests in 27 blocks.

Valuation Method and Risk Statement

We value Indian SOE oil marketing companies (OMCs) such as Bharat Petroleum on PE, as

they derive a significant portion of their earnings from equity-accounted JVs, which we

believe are not properly captured in EV/EBITDA methodology.

Risks: OMCs' earnings are sensitive to crude oil price and refining margin volatility. They also

face the risk of fuel subsidies if oil prices rise sharply and the government intervenes in free

pricing; in the past, OMCs have borne a portion of the losses. Also, delays in subsidy

payments by the government/upstream companies could drive up OMCs' working capital,

debt and interest costs. A greater-than-expected market share gain by the private sector

could also impact our marketing volume and earnings assumptions for SOE OMCs. OMCs'

and stand-alone refiners' earnings are also prone to delays in new refinery and pipeline

projects.

First Read: Bharat Petroleum 24 July 2026 ab 3