MRPL Q1 Results Review - Outlook Modest Amid Volatile Macros: Motilal Oswal

Motilal Oswal Report

Mangalore Refinery and Petrochemicals Ltd. missed our Ebitda and profit after tax estimates due to lower-than-estimated reported gross refining margin of $9.8/barrel of oil in Q1 FY24. Refining throughput was in line at 4.36 million metric tonne (versus 4.41 mmt in Q4 FY23).

MRPL achieved its highest ever monthly motor spirit production of 229.9 thousand million tonne/month. It also clocked the highest ever MS-VI domestic dispatch at 178 mt in June 2023.

Total retail outlets stood at 68 at end-Q1 FY24 versus 63 at end-FY23. The company also reduced its total debt to Rs 151.7 billion at end-Q1 FY24 from Rs 167.1 billion at end-Q4 FY23.

Singapore GRM has increased to $6.1/bbl during Q2 FY24-to-date after declining 51% QoQ to $4/bbl in Q1 FY24. It averaged $10.8/bbl during FY23 and had even touched a record high of $21.7/bbl in Q1 FY23.

We forecast a core GRM of $6/bbl for MRPL from Q2 FY24 onwards.  Considering its underperformance in Q1 FY24, we cut our FY24E Ebitda/profit after tax by 14%/20% while keeping the estimates broadly unchanged for FY25.

Multiple initiatives are in place to improve the contribution from marketing margins in both domestic and export markets along with the B2B segment.

However, our doubt still remains strong on the capability of the company to deliver sustainable earnings growth.

Considering the above factors, we maintain our 'Neutral' rating with a target price of Rs 78 (valuing the entity at 4.5 times FY25E Ebitda of Rs 58.6 billion).

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