BPCL target cut to Rs 385 as high crude prices threaten near-term earnings

What happened

Nomura kept its Buy rating on Bharat Petroleum Corporation but cut its target price to Rs 385 from Rs 395. BPCL reported Q2FY27 standalone EBITDA of Rs 90 billion, below Nomura's Rs 112 billion estimate. Higher freight costs and a smaller discount on Russian crude reduced refining margins.

Confirmed

Global impact / market context

A lower target price signals the broker expects weaker near-term earnings. For investors, that means less profit from refining and fuel sales could reduce cash available for capital spending and dividends. The Rs 385 target still implies upside, so the rating stays positive.

Analyst inference

With Brent crude above $110 per barrel, oil marketing companies face losses of around Rs 26 per litre at current run rates, which means buying crude and selling fuel can lose money. That pressures fuel marketing profits and links BPCL's earnings to crude prices.

Analyst inference

What to watch

1. Watch BPCL's Q3FY27 earnings for the impact of Brent crude above $110 per barrel, which Nomura says could cause losses of around Rs 26 per litre at the current run rate. Confirmed
2. Watch whether Nomura's forecast of fuel marketing margins of Rs 3 per litre in FY28-29 holds, which means profit per litre sold, as investors are expected to moderate expectations. Proposed
3. Watch the LPG under-recovery buffer, which rose to Rs 173.3 billion from Rs 158 billion in Q1, as controlled LPG pricing means selling below cost and can keep draining cash. Analyst inference

Evidence

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