MRPL - Strong Earning Visibility, RoE Improvement Going Forward: HDFC Securities

HDFC Securities Retail Research

Considering the strategic importance of Mangalore Refinery and Petrochemicals Ltd.’s refinery in the southern India, expansion plan and strong promoter back ground, we expect the financial performance and valuation to improve in the medium term.

MRPL’s ongoing enhancement projects and expectation of sustained bounce back in gross refining margin could lead to strong earning visibility and return on equity improvement going forward.

MRPL has strong asset profile, led by the superior processing capabilities of its refinery as reflected by high Nelson Complexity index, its experienced management team and favorable location, being close to the port.

Considering its smaller size and volatile refining margin profile (almost nil marketing margins), the stock is trading at lower valuation than other refiners.

Expectations of strong revenue growth and margins expansion (including marketing margins over two-three years), combined with healthy RoE make a case for higher multiple.

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