IGI Logo

Downgrade to sell amid volatile performance

MRPL missed our EBITDA and PAT estimates due to lower-than-estimated reported GRM of USD5/bbl in 3QFY24. Refining throughput was in line with our estimate at 4.4mmt.

Phase 3 units and Hydrocracker Unit 1 safely restarted during the quarter post mandatory maintenance shutdown for 45 days in 2QFY24. Opex also moderated during the quarter after being adversely impacted in 2Q because of the shutdown and reduced throughput.

MRPL clocked its highest ever monthly gross crude input of 1558tmt/month in Dec’23. During the quarter, the company also procured and processed 20tmt of High Sulphur Fuel Oil for the first time.

SG GRM has rebounded to USD7.2/bbl during 4QFY24’td after declining 42% QoQ to USD5.5/bbl in 3QFY24. The SG GRM trend highlights that a sustained good performance remains a concern, given the highly volatile macro environment. We forecast a GRM of USD8/bbl from 4QFY24 onwards, which is on the higher side compared to the company’s historical performance.

Considering the underperformance in 3QFY24, we cut our EBITDA/PAT estimates by 7%/11% for FY24 and downgrade the stock to sell. The stock is currently trading at FY25E P/BV of 2.2x, which is significantly above its longterm average of ~1.3x. Additionally, the dividend yield is expected to be at a meagre 2% in FY24 at the current price.

Miss due to lower-than-estimated GRM

 Refining throughput was in line with our est. at 4.4mmt (down 1% YoY)

Reported GRM came in below our est. at USD5/bbl (vs. our est. of USD8.3/bbl)

Resultant EBITDA was below our est. at INR11.9b (vs. est. EBITDA of INR16.6b)

PAT was also below our est. at INR3.9b (vs. our est. of INR7.3b) due to lower-than-estimated other income.

The company has declared an interim dividend of INR1/share during the quarter.

Valuation and view – downgrade to SELL

MRPL aspires to capture the domestic retail market to the tune of 1mmtpa. The company has already initiated advertising for 1,800 retail outlets, which are expected to be completed soon. Additionally, MRPL expects to add 500 outlets over the next three years. In Phase 1, the focus will be on South India, followed by expansion into West and North India in Phase II.

The stock is currently trading at an FY25E P/BV of 2.2x, well above its long-term average of ~1.3x. Additionally, the dividend yield is expected to be at a meagre 2% in FY24 at the current price. Our GRM assumption of USD8/bbl from 4QFY24 onwards is also on the higher side compared to the company’s historical performance.

We value the stock at 5.5x Dec’25E EBITDA of INR62b to arrive at our TP of INR135. We downgrade the stock to SELL.

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html

SEBI Registration number is INH000000412