IGI Logo

Our View

Mangalore Refinery Petrochemical’s Q1FY25 core performance was weaker at USD 3.8/bbl, with an EBITDA of Rs 6.1bn; $4.7/bbl of reported GRM (our est. USD5) on narrowing Russian crude discounts, higher freight due to shutdown of SPM and exports of higher discounted products. As per our calculations, the inventory gains could be at USD0.9/bbl. There was no impact of SAED during the quarter. We maintain ADD rating on stock with an unchanged TP of Rs257.

Result Highlights

*  EBITDA/PAT at Rs bn 6.1/0.7, weaker performance on YoY basis declining by 70.7%/93.5% and on QoQ basis it declined by 74%/94.3%. The EBITDA was significantly lower than ours and the consensus estimates on weak core GRMs despite no SAED impact.

*  MRPL’s Q1FY25 reported GRM was USD4.7/bbl (USD11.4 the previous quarter, USD9.8 a year ago). The GRM was lower than our expectations of USD5/bbl. Higher exports (~30% of revenue) where the product realization were at a discount and much lower than the domestic prices lead to this under performance as compared to other Indian refiners who sell most in the domestic market. SPM was also not under works for May-Jun’24 which also resulted in higher freights costs (expected to resume early Sep’24). The assumed core GRM at USD3.8/bbl (USD710.4 the quarter prior, USD11.5 a year back) was at a marginal premium of USD0.4/bbl to the benchmark of USD3.4. The Russian crude discounts continued to be lower at ~USD2-3/bbl. As per our assumptions, the Inventory gain could be at USD0.9/bbl (Rs2.45bn) vs a gain of USD1.0 the previous quarter and a loss of USD1.6 a year ago. Refinery throughput was 4.35mmt at ~115% utilization (119% the prior quarter, 117% a year ago).

*  The opex stood lower at USD3.6/bbl, higher than 8-qtr average of 2.8, was largely on higher sourcing of RLNG which was expensive. The Rs 107mn forex loss marginally impacted the profitability.

* Capex for the qtr was Rs950mn, as per the management FY25 capex is targeted at Rs 12bn. The debt stood at Rs118.3bn, down Rs6.2bn QoQ and Rs33.3bn on YoY basis supported by stronger GRMs, FCF and reduction in working capital requirements.

*  Crude sourcing mix. Russia at 35%, Saudi 30%, Iraq 10%, domestic 20% others 5%. The Russian crude discounts were lower as the system for booking of crude price changed from delivery to the port to Russian port exit. It takes ~30days for crude to reach Indian port when left Russian port.

* In terms of the slate mix, the contribution of diesel to slate was ~44%, gasoline ~15%, ATF ~10%, LPG ~7% and fuel & loss 10.4%.

Valuation

The GRM sensitivity for the stock is high: a $1/bbl change in GRM changes EBITDA by Rs 10.3bn. BV/share for FY25e/26e: Rs 86/97; debt: equity at 0.7/0.6x FY25e/26e vs 0.9x in FY24. At CMP, stock trades at 9.5x/9.2x FY25e/26e EV/EBITDA & 2.5x/2.2x P/BV. We maintain ADD rating on stock with an unchanged TP of Rs257, valuing the stock at 10.7x FY26e EV/EBITDA.

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632.