CLSA downgrades BPCL to underperform on Q2 results

MUMBAI: Shares of oil marketing company BPCL were witnessing profit booking after CLSA downgraded the stock to ‘Underperform’ from ‘Buy’ after second quarter results.

The company’s net profit in September quarter fell by about 50 per cent to Rs 464.20 crore from Rs 931.13 crore in the corresponding quarter last fiscal.

According to the management, sharp fall in crude oil prices impacted gross refining margins (GRMs )in second quarter. It expects to see improvement in GRMs in third and fourth quarter.

Average GRMs for half year ended September was $2.36 per barrel.

The company is taking measures to improve non-fuel side of business.

CLSA is of the view that that oil marketing companies no more benefit from falling crude price. The brokerage cautions that these companies may have to bear one-time inventory losses due to declining crude oil prices.

“Recent stock price builds in continuation of supernormal marketing margins and ignores the risks of upcoming competition from private players,” the CLSA report said.

“Marketing margin and volumes of OMCs will be at risk as competition from private players ramps up in the auto fuel marketing space in the coming months," it added.

The last minute subsidy reimbursement from government has boosted Q2 earnings, the report says

CLSA has revised its target price upwards to Rs 800 from Rs 675 earlier.

At 12:25 p.m.; the stock was at day’s low at Rs 731, down 4.23 per cent, on the BSE. It touched high of Rs 754 intraday.