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Motilal Oswal Report
Mangalore Refinery and Petrochemicals Ltd.'s Q2 FY24 missed our Ebitda and profit after tax estimates due to a lower-than estimated reported gross refining margin of $17.1/ barrel of oil. Refining throughput was lower than our estimate of 3.2 million metric tonne, as the Phase-III refinery was shut down for maintenance during Q2 FY24. Opex also increased because of the shutdown and reduced throughput.
MRPL achieved its highest ever monthly MS-VI production of 195 tmt/month in August- 23. The company also clocked the highest ever MS-VI domestic dispatch at 188 million tonne in July- 23. Total retail outlets stood at 75 as of Q2 FY24 versus 68 as of Q1 FY24. MRPL has also reduced its total debt to Rs 139.8 billion as of end- Q2 from Rs 151.7 bilion as of end- Q1.
Singapore GRM has contracted to $3.3/bbl during Q3 FY24 to-date after surging 1.5 times QoQ to $9.8/bbl in Q2 FY24. The SG GRM trend highlights that sustained good performance remains a concern given the highly volatile macro environment at least in the short term. We forecast a GRM of $10/bbl in Q3 and $8/bbl in Q4 FY24.
MRPL aspires to capture the domestic retail market to the tune of 1 million metric tonnes per annum. It has already rolled out advertisements for another 1,800 retail outlets, which would be completed soon. Management expects to add 500 outlets in the next three years, with Phase-I focusing on South India followed by West and North India in Phase II.
Considering the underperformance in Q2 FY24, we cut our PAT estimate by 14% for FY24 while increasing our Ebitda estimate by 8% for FY25. Multiple initiatives are in place to improve the contribution from marketing margins in both domestic and export markets, along with the business to business segment.
We maintain our 'Neutral' rating with a target price of Rs 110 (valuing the entity at five times FY25E Ebitda of Rs 63 billion).
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