After its recent correction, BPCL’s stock has underperformed HPCL/IOCL by 31%/17% over 2 years. Its current fwd P/B multiple is the lowest in 7 years and at a 20% discount to the multiple in CY19 before the government announced its privatisation intent. With valuation favourable (1.6x fwd P/B vs last cycle peak of 3.5x), we expect its outperformance over OMC peers to resume on higher capital efficiency. Buy with Rs 540 PT to play the refining cycle recovery.
BPCL stock underperformance: The stock has corrected 26% from its recent peak and is now down 3%/28% in the past 1-yr/2 yrs. It has underperformed HPCL by 41%/31% on 1-yr/2-yr basis. It has also underperformed IOCL by 40%/17%. While the large special dividend paid in Sep-21 has offset a part of the stark underperformance, we note that BPCL outperformed HPCL/IOCL 97%/241% over the last decade.
