BofA-Bharat Petroleum Corporation Limited 1QFY26：Slight EBITDA miss；Russian crude sourcing...-20250818

1Q: Slight EBITDA miss

BPCL’s reported 1Q’FY26 standalone EBITDA at INR97bn came 6% below consensusestimates. GRM declined to US$4.9/bbl vs US$9.2/bbl in 4Q mainly on (i) higher levels ofinventory maintained by the company due to geopolitical tensions, (ii) narrowing ofRussian crude discounts (US$1.5/bbl in 1Q). Russian crude constituted 34% of thesourcing mix (vs 24% in 4Q). BPCL continues to generate the highest throughput perretail outlet (RO) amongst its PSU peers (153 KL/month vs 137 KL/month PSU average)driven by access to strategic markets and strong network along highways. We raise ourFY26E EBITDA by 28% and PO to INR360/sh (vs INR345/sh) given the recentlyannounced LPG compensation (see: Oil & Gas - India: INR300bn compensation easesLPG margin strain for OMCs). Reiterate Buy on favorable risk-reward.

Russian crude sourcing to remain at 30-35%

Key updates from earnings conf. call – (i) Refining: Russian crude sourcing to remain at30-35% (barring new sanctions); (ii) Marketing: Steady-state petrol/ diesel marketingmargins of INR2.5-3.0/L are sufficient to meet company’s capex plans. 317 new ROs(total: 23,958) were commissioned in 1Q with plans to increase to 25k ROs by FY26-end;(iii) LPG compensation: BPCL expects to receive 25-26% of the recently announced LPGcompensation of INR300bn; (iv) Capex: FY26 capex maintained at INR200bn. FY27 capexto be likely around INR220-250bn with peak capex (INR300-350bn) likely in FY29.