Review
In this edition, we have reviewed Bharat Petroleum Corporation Ltd. and EIH Ltd. We suggest our reader-investors to HOLD in Bharat Petroleum Corporation Ltd. and EIH Ltd.
We had recommended Bharat Petroleum Corporation Limited in Volume 36, Issue No. 5, dated January 18-31, 2021, under the ‘Cover Story’ segment. The recommended price for the stock was Rs380.65. It was given a positive bias on the basis of the rising demand for petroleum products. The company is an Indian government-owned oil and gas corporation under the ownership of Ministry of Petroleum and Natural Gas. It is headquartered in Mumbai and operates two large refineries in Kochi and Mumbai. The consolidated quarterly financials of the company indicate that net sales and other operating income was Rs99,733.20 crore in Q4FY21 as compared to Rs81,829.60 crore in Q4FY20, recording growth of 21.88 per cent. The operating profit ascended massively from Rs282.77 crore in Q4FY20 to Rs6,977.35 crore in Q4FY21.
Net profit turned positive at Rs10,206.39 crore in Q4FY21 as against net loss of Rs2,082.60 crore in Q4FY20. On the annual front, net sales and operating income descended by 7.74 per cent from Rs3,29,797.16 crore in FY20 to Rs3,04,266.28 crore in FY21. The operating profit exhibited strong growth in FY21 at Rs23,549.41 crore as compared to Rs10,860.45 in FY20. Net profit on an annual basis increased significantly at Rs17,645.36 crore in FY21 as compared to Rs2,265.11 crore in FY20. The results for the fourth quarter of FY21 were better on the profitability front due to inventory and exceptional gains. Crude oil prices experienced a sharp spike during the quarter on expectations of a global demand recovery. Though capacity utilisation was reduced to 86-87 per cent in May 2021, an improvement in global product cracks and expected recovery in fuel demand will remain crucial for BPCL’s profitability in the coming quarters.
On the back of strong demand revival for petroleum products and sound liquidity, the overall outlook for the petroleum sector remains stable. Hence, we recommend HOLD.
We had recommended EIH Limited in Volume 36, Issue No. 5, dated January 18-31, 2021 under the ‘Cover Story’ segment. The recommended price for the stock was Rs92.45 and it was in favour on the basis of the predicted revival in travel and tourism on the back of the gradual reopening of the economy. EIH is the flagship company of the Oberoi Group which manages 33 hotels. The company operates these hotels under the brands Oberoi (super luxury brand), Trident (five star brand) and Maidens. EIH also provides catering and kitchen services to airlines and operates restaurants and lounges at airports. It is also engaged in the air charter and car hire service segment. On a consolidated quarterly basis the company’s net sales and other operating income was recorded at Rs95.93 crore in Q1FY22 as compared to Rs29.74 crore in Q1FY21, indicating a significant rise. Operating loss reduced from Rs125.94 crore in Q1FY21 to Rs86.75 crore in Q1FY22.
Net loss narrowed in the quarter and registered at Rs96.92 crore in Q1FY22 as compared to net loss of Rs130.15 crore in Q1FY21. On the annual front its net sales and operating income squeezed by 68.86 per cent from Rs1,596.25 crore in FY20 to Rs497.08 crore in FY21. The operating profit of Rs 368.70 crore of FY20 turned into an operating loss of Rs233.98 crore in FY21. FY21 reported a net loss of Rs314.62 crore as against net profit of Rs165.28 crore reported in FY20. Recently, the company has signed an MoU with Energy Efficiency Services (EESL). Within the ambit of this partnership, EESL, through its nationwide network, will collaborate with all Oberoi brand hotels and resorts to evaluate opportunities for saving energy and lowering emissions. Expected resumption of normalcy with settling down of the pandemic would drive strong tourism demand for the future quarters. Hence, we recommend HOLD.
(Closing price as of Aug 10, 2021)