MRPL - ACCUMULATE - TP Rs.138 - Result Update - Kotak

- MRPL reported lower than expected performance due to one-time exceptional charge and lower production. Despite 11% qoq and 12% yoy decline in crude throughput, MRPL reported a PAT of Rs. 4.8 bn in Q2FY18, higher 104% qoq (base effect) and 15% yoy mainly due to higher GRMs, higher other income and lower taxes. MRPL's refining margin stood higher at US$8.05/bbl in Q2FY18 as compared to US$4.74/bbl in Q1FY18 and US$4.65/bbl in Q2FY17. However, crude throughput was lower at 3.53 mmt, down 11% qoq.

- In Q3FY18, Singapore gross refining margin (GRMs) has decreased significantly mainly on account of fall in Petrol, Diesel, and Jet cracks. Benchmark refining margins have decreased meaningfully in Q3FY18 to US$6.8/bbl, down 11% qoq (till date).

- Going ahead, we expect MRPL's profitability to improve on account of i). Improved product mix, ii). Better refining margins iii). Economies of scale, iv). Forward integration - Polypropylene plant and v). Various tax benefits. At current price, the stock is trading at 8.1x P/E and 2.0x P/B multiples on FY19E earnings. We maintain ACCUMULATE recommendation with a revised price target of Rs.138 (earlier Rs.150), valuing it at 6x FY19E EV/EBIDTA. We expect higher crude oil prices will hurt the margins and accordingly we have tweaked our estimates. We expect stock to remain in focus on the news flow of merger with HPCL.

Shares of MANGALORE REFINERY & PETROCHEMICALS LTD. was last trading in BSE at Rs.121.35 as compared to the previous close of Rs. 122.15. The total number of shares traded during the day was 266862 in over 2107 trades.

The stock hit an intraday high of Rs. 125.65 and intraday low of 120.35. The net turnover during the day was Rs. 32833466.

Source : Equity Bulls

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