Result Update

May 29, 2012

Rating matrix
Rating Target Target Period Potential Upside : : : : Buy | 841 12-15 months 17%

Bharat Petroleum Corporation (BHAPET)

| 717
WHATS CHANGED
FY13E 251669.4 4200.4 1506.1 FY14E 247823.3 4500.7 1645.3

Key Financials
(| Crore) Revenues EBITDA Net Profit FY11 151625.2 3494.0 1546.7 FY12E 211957.2 3934.6 1311.3

PRICE TARGET........................................................................................................... | 841 EPS (FY13E)......................................................................... Changed from | 47.3 to | 41.7 EPS (FY14E)............................................................................................................... | 45.5 RATING...............................................................................................................Unchanged

Valuation summary
EPS (|) PE (x) Target PE (x) EV to EBITDA (x) Price to book (x) RoNW (%) RoCE (%) FY11 42.8 16.8 19.7 12.7 1.8 11.0 5.6 FY12E 36.3 19.8 23.2 11.9 1.7 8.8 5.6 FY13E 41.7 17.2 20.2 10.7 1.6 9.5 6.6 FY14E 45.5 15.8 18.5 9.5 1.5 9.7 7.7

Subsidy surprise from government

Bharat Petroleum Corp (BPCL) declared its Q4FY12 results with revenues at | 64668.9 crore, EBITDA at | 5083.9 crore and PAT at | 3962.8 crore. The results were above our estimates mainly on account of additional budgetary support from the government (total compensation of | 83500 crore for FY12 that accounts for 60.3% of gross under-recovery). BPCL had a net over recovery of | 3637 crore during Q4FY12 due to a subsidy of | 9153.2 crore from the government and a discount of | 4333.7 crore from the government. The crude oil throughput grew 7.1% YoY to 6.0 MMT whereas total sales increased 6.1% YoY to 8.2 MMT. The gross refining margins (GRMs) at US$4.2 per barrel in Q4FY12 grew sequentially on a QoQ basis due to inventory gain. Interest costs grew 56.5% on a YoY basis due to a delay in government compensation towards under-recovery. Outlook Recent discoveries at Golfinho in Mozambique by the BPCL-Anadarko consortium add great value to the company. We have valued the Rovuma basin (Mozambique) at | 287.5 per share and BM-C-30, Campos Basin (Brazil) at | 45.6 per share. With the company planning to drill 10-12 wells a year, we expect further upside in the Mozambique block. We expect gross under-recoveries at ~| 1,72,534 crore and ~| 1,83,439 crore in FY13E and FY14E, respectively, while maintaining our assumption of the share of downstream companies at 6% of gross under-recovery.

Stock data
Market Cap. Debt (FY11) Cash + Liq. Invsts (FY11) EV 52 week H/L Equity capital Face value MF Holding (%) FII Holding (%) | 25922.4 Crore | 18971.9 Crore | 7503.7 Crore | 37390.6 Crore 796 / 458 | 361.5 Crore | 10 10.2 7.9

Price movement
6,500 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 Feb-11 May-11 Aug-11 Nov-11 Nifty (L.H.S) Price (R.H.S) 750 650 550 450 350 250 150 50 Feb-12

Valuation
The stock is trading at 17.2x FY13E and 15.8x FY14E EPS of | 41.7 and | 45.5, respectively. We recommend a BUY rating on the stock and a price target of | 841 (valuation based on average of P/BV multiple: | 973 per share and P/E multiple: | 709 per share).
Exhibit 1: Financial Performance
(| Crore) Revenues EBITDA EBITDA Margin (%) Depreciation Interest Reported PAT EPS (|) Q4FY12A 64668.9 5083.9 7.9 468.1 494.1 3962.8 109.6 Q4FY12E 60393.2 3880.1 6.4 462.8 511.1 2975.2 82.3 Q4FY11 45272.0 1664.6 3.7 482.8 315.7 935.2 25.9 Q3FY12 58846.8 3709.7 6.3 466.7 517.4 3139.6 86.8 YoY Gr.(%) 42.8 205.4 426 bps -3.0 56.5 323.8 323.8 QoQ Gr.(%) 9.9 37.0 160 bps 0.3 -4.5 26.2 26.2

Analysts name
Mayur Matani mayur.matani@icicisecurities.com Nishit Zota nishit.zota@icicisecurities.com

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Exhibit 2: Total sales and throughput trend

10 9 (mmt) 8 7 6 5 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Throughput (RHS) Q4FY12 2 0 7.8 5.6 7.8 5.2 7.0 5.6 8.0 6.1 8.2 6.0 8 6 4 (mmt) EBITDA margin (%)

The crude oil throughput grew 7.1% YoY to 6.0 MMT whereas the total sales increased 6.1% YoY to 8.2 MMT

Total sales (LHS)

Source: Company, ICICIdirect.com Research

Exhibit 3: Refining margins trend

7.5 6.0 US$ per barrel
The gross refining margins at US$4.2 per barrel in Q4FY12 grew sequentially on a QoQ basis due to inventory gain

6.9

4.5 3.0 1.5 0.0 Q4FY11 Q1FY12 Q2FY12 3.0 1.6

3.6

4.2

Q3FY12

Q4FY12

Source: Company, ICICIdirect.com Research

Exhibit 4: EBITDA and EBITDA margins trend

6000 5000 4000 3000
The EBITDA increased on account of additional budgetary support from the government (total compensation of | 83500 crore for FY12) of which | 9153.2 crore of government support was for BPCL

5083.9 3709.7 7.9 6.3 Q1FY12 -4.7 -2164.2 EBITDA -6.4 -2694.8 EBITDA margins Q2FY12 Q3FY12 Q4FY12

18 15 12 9 6 3 0 -3 -6 -9

| Crore

2000 1000 0 -1000 -2000 -3000

1664.6 3.7 Q4FY11

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 2

Exhibit 5: Sharing of gross under-recoveries

(| Crore)
Additional budgetary support from the government led to an over-recovery of | 3637 crore in Q4FY12

Q4FY11 6696.5 3091.5 4346.7 -741.7

Q1FY12 10289.5 3409.1 3524.5 3356.0

Q2FY12 4868.8 1641.8 0.0 3227.0

Q3FY12 7629.4 3572.7 6993.7 -2937.0

Q4FY12 9849.9 4333.7 9153.2 -3637.0

Gross under-recoveries Discount from upstream companies Grant from the government Net under-recoveries

Source: Company, ICICIdirect.com Research

Exhibit 6: Quarterly profit and loss account

Consumption of raw materials Revenues (Increase) / Decrease in stock in trade Consumption of raw materials Purchase of traded goods Employees Cost Other Expenditure Total Expenditure EBITDA Depreciation EBIT Interest Other Inc /Exp /Extra Ordinary Item PBT Total Tax PAT Q4FY12 64668.9 350.5 23504.9 33672.5 704.0 1353.2 59585.1 5083.9 468.1 4615.8 494.1 411.4 4533.1 570.3 3962.8 Percent. (%) 100.0 0.5 36.3 52.1 1.1 2.1 92.1 7.9 0.7 7.1 0.8 0.6 7.0 0.9 6.1 Q4FY11 45272.0 -450.5 16991.3 23891.3 1239.4 1935.9 43607.4 1664.6 482.8 1181.8 315.7 510.1 1376.2 441.0 935.2

(| Crore)
Percent. (%) 100.0 -1.0 37.5 52.8 2.7 4.3 96.3 3.7 1.1 2.6 0.7 1.1 3.0 1.0 2.1

Source: Company, ICICIdirect.com Research

Valuations
The stock is trading at 17.2x FY13E and 15.8x FY14E EPS of | 41.7 and | 45.5, respectively. We recommend a BUY rating on the stock and a price target of | 841 (valuation based on average of P/BV multiple: | 973 per share and P/E multiple: | 709 per share).
Exhibit 7: Valuation Table
Year FY11 FY12E FY13E FY14E Sales (| Crore) 151625.2 211957.2 251669.4 247823.3 Sales Gr. (%) 23.9 39.8 18.7 -1.5 EPS (|) 42.8 36.3 41.7 45.5 EPS Gr. (%) 0.6 -15.2 14.9 9.2 PE (x) 16.8 19.8 17.2 15.8 EV/EBITDA (x) RoNW (%) RoCE (%) 12.7 11.9 10.7 9.5 11.0 8.8 9.5 9.7 5.6 5.6 6.6 7.7

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 3

Exhibit 8: Valuation Table

Valuation based on Price / BV Multiple Adjusted Book Value for FY13E (|Crore) Adjusted number of shares (Crore) Adjusted Book Value per share (|) Add: Listed investments (25% discount to CMP) Add: E&P value Book Value of core business (| per share) Multiple Fair Value per share (|) Valuation based on P / E multiple Profit after tax for FY13E (| Crore) Less: Other Income adjusted for tax (| Crore) Adjusted profit after tax for FY13E (| Crore) Number of shares (Crore) Adjusted EPS for FY13E (|) Multiple Fair value per share without investments (|) Add: Value of Investments (| per share) Listed investments (20% discount to CMP) Bharat Oman Refinery Ltd Numaligarh Refinery E&P value (BPRL) Treasury shares Other Investments Fair value per share (|) Weighted Target Price (| per share) 51.5 59.4 12.5 333.2 66.9 16.8 709 841 1506.1 1037.0 469.1 36.2 13.0 13.0 168.7 13791.0 32.8 420.7 60.6 333.2 814.4 1.2 973

Source: ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

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Financial summary
Profit and loss statement
(Year-end March) Revenue Growth (%) (Inc.)/(Dec.) in stock in trade Raw material Costs Purchase of Products Employee Costs Other Expenditure Op. Expenditure EBITDA Growth (%) Depreciation EBIT Interest Other Income PBT Growth (%) Tax Reported PAT Growth (%) FY11 151,625.2 23.9 -2,056.1 62,730.4 76,366.3 2,802.9 8,287.7 148,131.2 3494.0 41.9 1,655.4 1,838.6 1,100.8 1,674.8 2,412.6 2.0 866.0 1546.7 0.6 FY12E 211,957.2 39.8 -601.6 85,563.0 112,159.2 2,288.8 8,613.4 208,022.6 3934.6 12.6 1,884.9 2,049.7 1,799.6 1,634.1 1,884.2 -21.9 572.9 1311.3 -15.2 FY13E 251,669.4 18.7 0.0 95,899.0 140,701.9 2,354.0 8,514.0 247,468.9 4200.4 6.8 1,844.7 2,355.8 1,655.6 1,547.7 2,247.9 19.3 741.8 1506.1 14.9 (| Crore) FY14E 247,823.3 -1.5 0.0 93,815.1 138,096.1 2,471.7 8,939.7 243,322.6 4500.7 7.1 1,835.8 2,664.9 1,495.6 1,286.4 2,455.7 9.2 810.4 1645.3 9.2

Cash flow statement

(Year-end March) Profit after Tax Less: Dividend Paid Add: Depreciation Add: Others Cash Profit Increase/(Decrease) in CL (Increase)/Decrease in CA CF from Operating Activities Purchase of Fixed Assets (Inc)/Dec in Investments Others CF from Investing Activities Inc/(Dec) in Loan Funds Inc/(Dec) in Sh. Cap. & Res. Others CF from financing activities Change in cash Eq. Op. Cash and cash Eq. Cl. Cash and cash Eq. FY11 1,546.7 592.2 1,655.4 148.2 2,758.1 4,827.2 -3,984.3 3601.0 2,479.9 2,123.4 0.0 -356.5 -3,223.3 16.4 0.0 -3,206.9 37.6 342.4 380.0 FY12E 1,311.3 465.3 1,884.9 50.0 2,780.8 3,719.3 -7,258.0 -757.8 3,371.4 1,903.7 0.0 -1,467.7 2,723.3 0.0 0.0 2,723.3 497.9 380.0 877.8 FY13E 1,506.1 507.6 1,844.7 342.5 3,185.6 4,841.0 -4,532.7 3493.9 4,000.0 2,400.0 0.0 -1,600.0 -2,000.0 0.0 0.0 -2,000.0 -106.1 877.8 771.7 (| Crore) FY14E 1,645.3 549.9 1,835.8 50.0 2,981.2 -232.4 821.5 3570.3 3,920.0 2,400.0 1.0 -1,520.0 -2,000.0 0.0 1.0 -2,000.0 50.3 771.7 822.0

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Balance sheet
(Year-end March) Source of Funds Equity Capital Preference capital Reserves & Surplus Shareholder's Fund Loan Funds Deferred Tax Liability Minority Interest Source of Funds Application of Funds Gross Block Less: Acc. Depreciation Net Block Capital WIP Total Fixed Assets Investments Inventories Debtor Cash Loan & Advance, Other CA Total Current assets Current Liabilities Provisions Total CL and Provisions Net Working Capital Miscellaneous expense Application of Funds FY11 361.5 0.0 13,696.1 14,057.6 18,971.9 1,007.5 0.0 34037.0 FY12E 361.5 0.0 14,542.1 14,903.6 21,695.2 1,057.5 0.0 37656.3 FY13E 361.5 0.0 15,540.5 15,902.1 19,695.2 1,400.0 0.0 36997.3 (| Crore) FY14E 361.5 0.0 16,636.0 16,997.5 17,695.2 1,450.0 0.0 36142.7

Key ratios
(Year-end March) Per share data (|) Book Value Cash per share EPS Cash EPS DPS Profitability & Operating Ratios EBITDA Margin (%) PAT Margin (%) Fixed Asset Turnover (x) Inventory Turnover (Days) Debtor (Days) Current Liabilities (Days) Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) PE Price to Book Value EV/EBITDA EV/Sales Leverage & Solvency Ratios Debt to equity (x) Interest Coverage (x) Debt to EBITDA (x) Current Ratio Quick ratio FY11 388.8 10.5 42.8 88.6 14.0 2.3 1.0 8.9 37.0 6.4 45.2 11.0 5.6 7.2 16.8 1.8 12.7 0.3 1.3 1.7 5.4 1.3 0.6 FY12E 412.2 24.3 36.3 88.4 11.0 1.9 0.6 11.5 32.0 7.0 41.0 8.8 5.6 6.5 19.8 1.7 11.9 0.2 1.5 1.1 5.5 1.4 0.7 FY13E 439.8 21.3 41.7 92.7 12.0 1.7 0.6 12.2 32.0 8.0 41.0 9.5 6.6 7.0 17.2 1.6 10.7 0.2 1.2 1.4 4.7 1.3 0.6 FY14E 470.1 22.7 45.5 96.3 13.0 1.8 0.7 10.9 32.0 8.0 41.0 9.7 7.7 7.5 15.8 1.5 9.5 0.2 1.0 1.8 3.9 1.3 0.6

29,334.2 13,334.9 15,999.3 1,012.2 17,011.6 11,378.0 15,375.1 2,664.4 380.0 9,186.4 27,605.8 18,788.3 3,170.0 21,958.3 5,647.5 0.0 34037.0

33,217.5 15,111.2 18,106.3 391.8 18,498.0 9,474.3 18,582.5 4,064.9 877.8 11,836.4 35,361.7 23,808.9 1,868.8 25,677.7 9,684.0 0.0 37656.3

35,232.5 16,955.9 18,276.6 2,376.8 20,653.3 7,074.3 22,064.2 5,516.0 771.7 11,436.4 39,788.3 28,269.7 2,248.9 30,518.6 9,269.7 0.0 36997.3

37,247.5 18,871.7 18,375.8 4,361.8 22,737.6 4,674.3 21,727.0 5,431.7 822.0 11,036.4 39,017.1 27,837.7 2,448.5 30,286.2 8,730.9 0.0 36142.7

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

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ICICIdirect.com Coverage Universe

BPCL Idirect Code BHAPET CMP Target 25922.4 Upside (%) 717.0 FY11 841.1 FY12E FY13E 17.3 FY14E Sales(| Cr.) 151625.2 211957.2 251669.4 247823.3 EPS (|) 42.8 36.3 41.7 45.5 PE (x) 16.8 19.8 17.2 15.8 EV/EBITDA (x) 12.7 11.9 10.7 9.5 RoNW (%) 11.0 8.8 9.5 9.7 RoCE (%) 5.6 5.6 6.6 7.7

MCap HPCL Idirect Code

HINPET CMP Target 10068.6 Upside (%)

MCap IOCL Idirect Code

297.0 FY10 368.0 FY11 FY12E 23.9 FY13E

108497.7 134119.9 176553.4 176463.4

38.4 45.4 8.8 44.0

7.7 6.5 33.9 6.8

9.1 8.9 11.1 6.6

11.3 12.3 2.4 11.3

6.8 6.7 3.8 8.6

INDOIL CMP Target 67011.4 Upside (%)

MCap

276.0 FY10 353 FY11E FY12E 28.0 FY13E

269136.0 328880.2 425942.4 424048.8

42.1 30.7 10.5 35.0

6.6 9.0 26.2 7.9

4.4 5.0 5.3 3.7

20.2 13.5 4.6 14.0

12.7 8.1 6.9 11.3

Exhibit 9: Recommendation History

1,000 900 800 700 600 500 400 300 200 100 0 Jun-11 Jul-11 Sep-11 Oct-11 Price Dec-11 Jan-12 Target Price Feb-12 Apr-12 May-12

Source: Company, ICICIdirect.com Research

Exhibit 10: Recent Releases

Date 8-Jun-11 29-Jun-11 17-Aug-11 9-Nov-11 15-Feb-12 24-May-12 28-May-12 Event Q4FY11 Result Update Event Update Q1FY12 Result Update Q2FY12 Result Update Q3FY12 Result Update Event Update Q4FY12 Result Update CMP 612 665 692 603 598 735 717 Target Price 640 712 727 693 643 870 841 Rating HOLD HOLD HOLD BUY HOLD BUY BUY

Source: ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

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RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;

Pankaj Pandey

Head Research ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com

pankaj.pandey@icicisecurities.com

ANALYST CERTIFICATION
We /I, Mayur Matani MBA Nishit Zota MBA research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.

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ICICI Securities Ltd | Retail Equity Research

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