Bharat Petroleum Corporation vs Mahindra & Mahindra Q2 FY25

BPCL reported Q2 FY25 PAT of ₹2,397 crore, impacted by ₹2,104 crore LPG under-recoveries and ₹1,113 crore marketing inventory losses. Refinery throughput was strong at 10.28 MMTPA (114% capacity) with GRM of $4.41/bbl, down from $8+ in Q1 due to lower cracks and reduced Russian crude throughput (34% vs 39%). Marketing volumes grew 1.6% YoY, driven by retail network expansion (540+ new outlets in H1). Management expects LPG losses to rise to ~₹3,000 crore/quarter in H2, but has approached the government for subsidy. CapEx guidance for FY25 is ₹15,000-16,000 crore, rising to ₹18,000 crore next year. Key risk: sustained weak refining margins and elevated LPG losses could pressure cash flows and delay deleveraging.

Guidance read

CapEx for FY25: ₹15,000-16,000 crore: Management expects to end the year with CapEx in the range of ₹15,000-16,000 crore, slightly below the original plan of ₹16,400 crore. LPG losses to rise to ~₹3,000 crore per quarter in H2: Assuming Saudi CP at $620-630/ton, management estimates monthly LPG under-recovery of ₹900-1,000 crore, implying ~₹3,000 crore per quarter. Retail demand growth: MS 6%, HSD 1.5% for FY25: Management estimates retail demand growth of 6% for petrol and 1.5% for diesel in FY25, with HSD urban demand slower due to CNG transition. CNG station additions: 300 in FY25, 800 over next 2-3 years: BPCL plans to add 300 CNG stations in FY25 and ~800 over the next 2-3 years, targeting 15-16% CAGR in CGD volumes.

Risk read

Key risks include Sustained LPG under-recoveries without government compensation — LPG losses are expected to rise to ~₹3,000 crore/quarter in H2, and management has only approached the government for budget support without certainty of compensation.; Weak refining margins may persist — Management expects similar crack levels for the next couple of quarters, with no big jump in spreads, which could keep GRMs subdued.; Potential delay in Mozambique LNG project — Force majeure has not been lifted yet; any further delay could defer planned CapEx and impact returns on the $2.15 billion already invested.; CNG margin compression due to gas deallocation — Recent deallocation of gas for CNG may squeeze margins, though management believes long-term deregulation will allow pass-through..

Promise ledger

Of 3 tracked promises, management 0 met, 0 close, 3 missed.

M&M delivered a strong Q2 FY25 with consolidated PAT up 35% YoY to INR 3,171 crore, driven by broad-based strength across auto, farm, and services. Auto revenue grew 15% YoY with PBIT margin expanding 140bps, supported by market share gains (21.9%) and successful price repositioning of XUV700. Farm domestic margins improved 150bps to 18.7% despite international headwinds. Services PAT surged 80% YoY, led by Tech Mahindra and Mahindra Finance. Management guided for mid-to-high teens auto volume growth and 6-7% tractor industry growth in H2, with EV launches (BE 6e, XEV 9e) in early 2025. Key risk: elevated launch costs and EV ramp-up may pressure near-term margins.

Guidance read

Auto volume growth of mid-to-high teens: Management expects full-year SUV portfolio volume growth of 15%-18%. Tractor industry growth of 6-7% for FY25: Revised tractor industry growth outlook to 6%-7% for the full year, implying 13%-15% H2 growth. EV launches in early 2025: Two electric origin SUVs (BE 6e and XEV 9e) to be revealed in November 2024 and in market early 2025. Auto PBIT margin medium-term goal of ~10%: Management targets auto PBIT margin to first reach FY19 levels of around 10% as a medium-term goal.

Risk read

Key risks include International farm business stress — North American tractor market has shrunk significantly (11 quarters of degrowth) and Turkish hyperinflation impacts accounting; management is evaluating but not exiting yet.; Urban demand slowdown — Management acknowledged fundamental stress in urban India, which could impact SUV demand if not offset by rural recovery.; EV launch costs and margin dilution — Q3 will see marketing and depreciation costs for EVs with no revenue, and EV margins as a percentage will be lower than ICE due to denominator effect.; LCV demand recovery uncertainty — LCV industry has been subdued for several quarters; while October showed positive turnaround, sustainability is uncertain..

Promise ledger

Of 3 tracked promises, management 0 met, 0 close, 3 missed.