IGI Logo

The stock price of Mangalore Refinery and Petrochemicals (MRPL IN) has risen 2% in the past three months, outperforming the Nifty Mid Cap Index ( flat QoQ ), due to rising transportation fuels crack . MRPL reported strong operational and financial performance in Q3, with EBITDA at INR 27.8bn (+170% YoY), sharply higher YoY and QoQ due to healthy gasoline & diesel cracks (up ~60 -100% YoY) . Global gross refining margins (GRMs) spike d sharply in Q3FY26 due to geopolitical risk in the Middle -East, sanctions -related product dislocations and strong middle -distillate d emand (diesel/ATF). So , the uplift in MRPL’s Q3 performance was largely macro -led and cyclical , and not structural .

Expect volatility in products cracks to persist due to sanctions, geopolitical uncertainty and supply chain complexity, which we believe would support GRM. In the long -term, the company’s r etail expansion strategy is the only structural re -rating lever . Iso -butyl -benzene (IBB) and bio -ATF plans are an optional upside , and not near -term value drivers . We raise FY26E/27E/28E EPS estimates by 12 0%/21%/5% on higher GRMs. So, we raise our TP to INR 163 from INR 144 on higher GRM, weaker INR as well as roll -over to FY28 E . We upgrade MRPL to Accumulate from Reduce.

GRM drives PAT: MRPL reported PAT of INR 14.5bn in Q3FY26 against INR 3.1bn in Q3FY25 and INR 6.3bn in Q2FY26 (Elara: PAT of INR 11.5bn) . Growth in GRM drove earnings growth. The positive earnings surprise indicates lower -than -expected opex . Higher throughput (up 4% YoY and 7% QoQ) and INR weakening also aided profit .

Transportation fuel cracks rose YoY: Per management , Q3 cracks (diesel USD 21/bbl, ATF similar to diesel , gasoline USD 13/bbl ) were higher than Q2 cracks (diesel USD 15/bbl, ATF USD 13/bbl, gasoline USD 8/bbl ). Currently, diesel cracks have moderated to ~ USD 14-15/bbl.

Expanding marketing operations: MRPL currently has 200 retail outlets and plans to reach 250 outlets by end -FY26 , to 500 after three years and to 1000 after five years . Average sales volume per month per outlet was at 120KL. The management explicitly stated that retail margins are superior and offer earnings stability versus exports. Retail currently contributes only ~1.5 -2% to volumes, but is positioned as a future profit driver. We factor in a value of INR 33 per share for retail outlets, assuming 500 outlets by FY2 9E, a margin of INR 6 per liter, annual sales of 2.4mn liters per outlet, and EV/EBITDA of 8.0x.

Upgrade to Accumulate; TP raised to INR 163: We rai se our FY26E/27E/28E EPS estimates by 120%/21%/5% on higher GRMs at USD 8.6/7.5/7.1 per barrel (from USD 7.1/7.0/7.0 per barrel ). We raise our TP to INR 163 from INR 144 on higher GRM, weaker INR as well as roll -over to FY28 E estimates. We value MRPL assuming GRM of USD 7.1/bbl (from USD 7.0/bbl) for FY28E and 6. 7x ( unchanged ) one -year forward EV/EBITDA. So, we upgrade MRPL to Accumulate from Reduce as volatility in products cracks may persist due to sanctions , geopolitical uncertainty and supply chain complexity.

Please refer disclaimer at Report
SEBI Registration number is INH000000933