Buy Mangalore Refinery and Petrochemical Ltd For Target Rs. 90 - ICICI Direct
Favourable refining scenario to drive earnings…
About the stock: Mangalore Refinery & Petrochem (MRPL), a subsidiary of ONGC, is a refining company.
* The company has total refining capacity of 15 MMTPA
* ONGC Mangalore Petrochemicals (OMPL), a subsidiary of MRPL, has been amalgamated with the company
Q4FY22 Results: MRPL reported sharp growth YoY in earnings with improvement in operational performance and tax write-back.
* Revenue was up 12.8% QoQ to | 28227.8 crore in Q4FY22. Crude throughput was flat QoQ at 4.4 MMT
* The company reported a sharp improvement in GRMs as per our understanding. EBITDA was | 2941 crore, up 71.2% QoQ
* MRPL reported PAT of | 3008.2 crore, up 413% YoY
What should investors do?
Product cracks of transport fuels are currently trading at multi-quarter highs. GRMs are likely to benefit from favourable global refining scenario and the MRPL is expected to report healthy earnings in near term.
* We revise our rating on the stock from SELL to BUY
Target Price and Valuation: We roll over valuations to FY24E and value MRPL at | 90/share i.e. ~1x FY24E BV)
Key triggers for future price performance:
* Sustained GRMs at elevated level
* Higher capacity utilisation
* De-leveraging balance sheet
Alternate Stock Idea:
Besides MRPL, in our oil & gas coverage we also like IOC.
* Indian Oil Corporation (IOC) is India’s largest refining & marketing company with an installed refining capacity of ~70 MMT. IOC’s GRMs are expected to remain healthy in the near term that will offset weaker marketing profitability. Pipeline business profitability has remained consistent over the last few years ï‚· BUY with a target price of | 150
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