Morgan Stanley maintains overweight on BPCL, sees earnings strength despite crude sourcing shift
Morgan Stanley has reiterated its overweight call on Bharat Petroleum Corporation Limited (BPCL) with a target price of ₹406 after the company posted a strong first-quarter performance that exceeded estimates even after adjusting for an inventory loss. Core earnings stood at ₹9,760 crore after accounting for a ₹2,000 crore inventory loss, with reported earnings indicating a 15% upside to the brokerage's forecasts despite a shift away from Russian crude.
Marketing volumes rose 3% year-on-year, outpacing the industry, with gasoline sales in line at 7% growth. The brokerage noted competitive pressure in the industrial diesel segment but highlighted that Russian crude discounts averaged $2–3 per barrel in FY25. BPCL may shift around one-third of its crude sourcing to the Middle East, which Morgan Stanley estimates could impact FY26 earnings per share by about 3%, although it believes this is largely priced into current valuations.
The brokerage sees BPCL's strong marketing performance, resilience in refining, and robust earnings delivery as key supports for its positive stance on the stock, even in the face of shifting crude sourcing dynamics.
Disclaimer: The views and recommendations made in this article are those of Morgan Stanley. This article does not constitute investment advice. Investors should consult their financial advisors before making any investment decisions.
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