Bharat Petroleum Corporation Company Update by HDFC Securities Institutional Research Report: 04, Feb 2026

Healthy Integrated Margin to Boost Earnings

We upgrade Bharat Petroleum (BPCL) from REDUCE to BUY, with a target price of INR 455. We expect BPCL’s integrated margin to remain strong due to increased share of marketing margin. We are building in marketing margin of INR 4.3/4.9/5.0 per litre for HSD and INR 4.5/4.7/5.2 for MS over FY26E/27E/28E. Given the high capex being undertaken by BPCL for setting up petchem plants and increasing refining capacity, we expect its RoE to decline by 517 bps from 26.8% in FY26E to 21.6% in FY28E. Nonetheless, stable integrated margin should result in EBITDA/PAT CAGR of 18/28% over FY25 to FY28E. Currently, the stock is trading at 4.4x FY27 EV/EBITDA and 1.5x FY27 BV. We believe integrated margins will remain healthy in the near term as crude oil prices remain benign and retail prices remain stable. BPCL, with fully integrated businesses from crude refining to marketing, will continue to benefit.

• Integrated margins: As mentioned earlier, we believe that the elevated gross refining margins should cool off as product spreads normalize in near to medium term. Marketing margins and gross refining margins are negatively correlated in the present environment where crude oil price is less volatile and there is no change in retail prices of auto fuels. Any reduction in gross refining margin will pave the way for higher marketing margin. This negative correlation between the two margins will result in integrated margin continuing to remain stable. To our mind, the government may not tweak either retail selling fuel prices or change the excise rate on transportation fuels at this juncture due to crude oil prices remaining stressed in the near term. This enables sustainable strong marketing margins for OMCs. Hence, we revise our FY26/27E marketing margin assumption upward for BPCL. According to our calculations, a INR 1/litre increase in BPCL’s marketing margin results in an annual EPS increase of ~8%.
• Petchem segment to observe near-term headwinds: The company believes that transportation fuel demand in India will continue to rise through 2040 and then plateau before declining from 2050 onwards. As a part of preparing BPCL to transition away from dependence on transportation fuel, management believes that expanding presence in petrochemical is of vital importance and hence is making significant investments in the petrochemical business. BPCL currently operates a PDPP plant in Kochi and is setting up a 400KTPA capex polypropylene unit at an estimated cost of INR 50bn. It is also setting up a petrochemical plant at Bina, which involves a 1,150 KTPA polypropylene plant and a 550 KTPA polypropylene plant. These projects will be completed by FY29 and consume naphtha and ethane as feedstock. While the management is confident of the current downcycle in the global petrochemical market reversing by FY29-30 and these investments yielding an IRR of 11% at the least, we believe the downcycle will last longer and have an impact on the business profitability in the first few years, following the completion of expansion.
• Refining: BPCL is expected to conclude the Bina refinery capacity expansion from 7.8MMTPA to 11MMTPA by FY29 and bottoms upgradation at the Mumbai refinery is expected to complete by FY30. This bottom-upgradation at the Mumbai refinery will provide higher volume of greater margin products leading to an increase in average GRMs. We are building core GRMs of USD 9.1/8.1/7.2 for FY26/27/28E.
• Valuation: We have increased our FY26/27E EPS estimates by 19/7% to reflect higher integrated margin. We revise our SOTP PT to INR 455/sh for 17.25x Mar-27E core EV/EBITDA for standalone refining, marketing and pipeline businesses and INR 65/sh for other investments. The stock is currently trading at 6.4x Mar-27E EPS.

BUY: CMP (as on 03 Feb 2026): INR 373

Target Price: INR 455

NIFTY: 25,728

KEY STOCK DATA

• Bloomberg code: BPCL IN
• No. of Shares (mn): 4,339
• MCap (INR bn) / (USD mn): 1,619 / 19,538
• Free float (%): 49
• 52 Week high / low: INR 388 / 234

STOCK PERFORMANCE (%)

SHAREHOLDING PATTERN (%)

Source: BSE

Consolidated Financial Summary

Source: Company, HSL Research

Article Source: HSIE Report (https://www.hdfcsec.com/hsl.docs/OMC%20-%20Thematic%20-%20Feb26%20-%20HSIE-202602041342388840128.pdf)

Disclaimer:

This report has been prepared by HDFC Securities Ltd and is solely for information of the recipient only. The report must not be used as a singular basis of any investment decision. The views herein are of a general nature and do not consider the risk appetite or the particular circumstances of an individual investor; readers are requested to take professional advice before investing. This report may have been refined using AI tools to enhance clarity and readability.

Nothing in this document should be construed as investment advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in securities of the companies referred in this document (including merits and risks) and should consult their own advisors to determine merits and risks of such investment. The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guarantee, representation or warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete. HSL is not obligated to update this report for such changes. HSL has the right to make changes and modifications at any time.

This report is not directed to, or intended for display, downloading, printing, reproduction or for distribution to use by, any person or entity who is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject HSL or its affiliates to any registration or licensing requirement within such jurisdiction.

If this report is inadvertently or has reached any person in such country, especially, United States of America, the same should be ignored and brought to the attention of the sender. This document may not be reproduced, distributed or published in whole or in part, directly or indirectly, for any purposes or in any manner.

Foreign currencies denominated securities, where mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk. It should not be considered to be taken as an offer to sell or a solicitation to buy any security.

This document is not, and should not, be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report should not be construed as an invitation or solicitation to do business with HSL. HSL may from time to time solicit from, or perform brokerage, or other services for, any company mentioned in this mail and/or its attachments.

HSL and its affiliated company(ies), their directors and employees may: (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.

HSL, its directors, analysts or employees do not take any responsibility, financial or otherwise, for the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividends or income etc.

HSL and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report, or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies / organizations described in this report. As regards the associates of HSL please refer the website.

HSL or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.

HSL or its associates might have received any compensation from the companies mentioned in the report during the preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service or a merger or specific transaction in the normal course of business.

HSL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither HSL nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. HSL may have issued other reports that are inconsistent and reach different conclusion from the information presented in this report.

Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the subject company or third party in connection with the Research Report.

Please note that HDFC Securities has a proprietary trading desk. This desk maintains an arm’s length distance with the Research team and all its activities are segregated from Research activities. The proprietary desk operates independently, potentially leading to investment decisions that may deviate from research views.

HDFC Securities Limited, I Think Techno Campus, Building – b, “Alpha”, Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066

Compliance Officer: Mr Milan V Karker Email: complianceofficer@hdfcsec.com Phone: (022) 3045 3600

For grievance redressal contact Customer Care Team Email: customercare@hdfcsec.com Phone: (022) 3901 9400

HDFC Securities Limited. SEBI Reg. No.: INESE, BSE, MSEI, MCX: INZ000186537; AMFI Reg. No. ARN: 13549; PFRDA Reg. No. POP: 11092018; IRDA Corporate Agent License No.: CA0062; SEBI Research Analyst Reg. No.: INH000002475; SEBI Investment Adviser Reg. No.: INA000011538; CIN – U67120MH2000PLC152193 Investment in securities market are subject to market risks. Read all the related documents carefully before investing.

Mutual Funds Investments are subject to market risks. Please read the offer and scheme related documents carefully before investing.

Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.