IGI Logo

Weak performance on lower GRMs from higher discounted product exports

Mangalore Refinery Petrochemical’s Q2FY25 core performance was weaker with an EBITDA loss of Rs 4.7bn; a USD0.55/bbl of reported GRM (our est. USD3) on lower realizations of exported products more than offsetting marginal Russian crude discounts, despite higher crude sourcing from Russia. As per our calculations, the inventory loss could be at USD2.93/bbl. There was no impact of SAED during the quarter. We maintain NEUTRAL rating on stock with a revised TP of Rs175.

Result Highlights

* EBITDA/PAT loss at Rs bn 4.7/6.8, weaker performance on YoY and QoQ basis declining sharply on lower GRMs, weaker product realizations on exports and inventory losses. The EBITDA was significantly lower than ours and the consensus estimates on weak core GRMs despite no SAED impact.

* MRPL’s Q2FY25 reported GRM was USD0.55/bbl (USD4.7 the previous quarter, USD17.1 a year ago) while the Arab heavy-light difference was USD1.3/bbl (lower than the prior quarter’s 1.5). The GRM was lower than our expectations of USD3/bbl. Higher exports (~33% of revenue) where the product realization were at a healthy discount and much lower than the domestic prices which lead to this under performance as compared to other Indian refiners who sell most in the domestic market. The assumed core GRM at USD3.48/bbl (USD3.8 the quarter prior, USD10.1 a year back) was at a marginal discount of USD0.1/bbl to the benchmark of USD3.6. The Russian crude discounts continued to be lower below USD2/bbl adding marginal benefit. As per our assumptions, the Inventory loss could be at USD2.93/bbl (Rs8.4bn) versus a gain of USD0.9 the previous quarter and a gain of USD7 a year ago. Refinery throughput was 4.58mmt at ~121% utilisation (115% the prior quarter, 85% a year ago). * The opex stood lower at USD2.4/bbl, lower than 8-qtr average of 2.8. There was a higher sourcing of RLNG which could be 0.4-0.5mmscmd versus a peak potential of 0.65mmscmd. The Rs 404mn forex loss marginally impacted the profitability.

* Capex for the qtr was Rs2.92bn, as per the cashflow statement (H1FY25 at Rs 3.87bn), FY25 capex is targeted at Rs 12bn. The debt stood at Rs132.5bn, up Rs14.1bn QoQ and down Rs7.3bn on YoY basis. Sharp sequential increase is due to weaker realizations from exports, GRMs, and FCF.

* Crude sourcing mix. Russia at 45%, Saudi 25%, Iraq 10%, domestic 20%. MRPL sourced 0.1mmt of crude from ONGC KG 98/2 which is priced marginally below the Indian crude basket price. 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%.

* Retail outlets: It has 118 operational retail outlets (+13 QoQ) and is planning add 1,000 outlets by FY27, initially focusing in southern India, post which it plans to expand in the West and Northern part of India.

* H1FY25 performance: EBITDA at Rs 1.3bn (vs Rs 42.1bn last year) while PAT loss at Rs 6.2bn (vs a profit of Rs 20.1bn in H1FY24) and reported GRM at USD2.6/bbl (vs USD12.9). The FCF at Rs 2.1bn (vs Rs 37.7bn last year) on lower GRMs.

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/27e: Rs 79.6/88.9/97.4; debt: equity at 0.9/0.7/0.6x FY25e/26e/27e vs 0.9x in FY24. At CMP, stock trades at 13.3x/8.5x/9.4x FY25e/26e/27e EV/EBITDA & 2.1x/1.9x/1.7x P/BV. We maintain NEUTRAL rating on stock with a revised TP of Rs175

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