Chennai Petroleum Corporation Q1FY08 Result Update (Accumulate)

Higher GRM boosts profitability

Chennai Petroleum Corporation Ltd. (CPCL) reported a sizeable growth in operating profit of 23% YoY and 47% QoQ, on the back of buoyancy in international refining margins and operating efficiencies, in spite of supply constrains. GRM of US$8.76/bbl for Q1FY08 is more than 30% higher than, US$6.64/bbl in Q1FY07 and US$6.42/bbl in Q4FY07. The stock is trading at EV/EBITDA of 4.3x and PER of 6x FY08E, a significant discount to its domestic and international peers. We believe global refining margin will remain buoyant due to tight demand-supply situation for petroleum products, which will eventually benefit the company. We recommend ‘Accumulate’ rating on the stock.

Chennai Petroleum Corporation Q1FY08 Result Update (Accumulate)