MRPL's Q4FY18 results (Outperformer) - Lower inventory gains drive a miss for the qtr
Q4FY18 result highlights
- Recurring PAT of Rs5.4bn for the quarter down 38% yoy. Reported EBITDA of Rs10.4bn (-16% yoy, IDFCe Rs10.5bn).
- Reported earnings below IDFCe Rs5.7bn, driven by lower GRMs and higher tax rate, offset by lower other opex and higher thruput.
- PPU unit gradually stabilising post the problems with the delayed coker unit in FY18, expected to run at 100% in FY19E.
- Inventory gains of US$1.4/bbl. Resultant, core GRMs of US$6.5/bbl was below IDFCe US$6.3/bbl.
- Refining thruput of 4.3mt for the quarter implies 115% utilisation. We note that distillate yield >75% over FY18, and PPU volumes are expected to go up to 100kt run rate per quarter over the next few quarters.
- FY18 EBITDA/Adj PAT of Rs42.8bn/ 22.4bn vs FY17 EBITDA/PAT of Rs44bn/25.7bn, with reported GRMs of US$7.5/bbl (-US$0.3/bbl yoy). Refining thruput of 16.3mt is flat yoy
- Depreciation costs of Rs1.6bn (-5% yoy) and interest costs of Rs1.1bn (-8%) were broadly in line.
Key positives: Strong utilisation and improving distillate yields in FY18
Key negatives: PPU unit yet to get to full utilisation.
Impact on financials: FY19/20E EPS reduced 15/5% on lower PPU estimates. TP reduced to Rs127.
Valuations & view
MRPL is on a structural growth path, with performance of the refinery to reflect the improved configuration and higher capacity which is complimented by an improved crude sourcing slate over FY19-20E. With the improvement from the PPU unit yet to kick in fully (utilization of the PPU plant estimated @90% for FY19) and the intent to reduce F&L below 10% over F19E, we see further uptick in GRMs over FY18-20E. Coupled with the expected turn to profitability for subsidiary OMPL, profitability for MRPL should continue to expand over the next 2 years. Valuations of just 6.2x FY20E EPS/4.1x EV/EBITDA underplay the strong growth in profitability and a potential dividend yield of 4% (30% pay-out on FY19E standalone EPS implies Rs5/sh pay-out, FY18 pay-out at ~~24%). Reiterate outperformer.
Mangalore Refinery and Petrochemicals Limited is a holding company .The Company is engaged in the business of refinery and manufacturing of refined petroleum products. Its segments include Domestic Sale and Export Sale. The Company is involved in the production of liquid or gaseous fuels, illuminating oils, lubricating oils or greases or other products from crude petroleum, and manufacture of other petroleum products, such as bitumen. Its products include pet coke, liquefied petroleum gas, fuel gas, mixed xylene, high speed diesel (HSD), vacuum gas oil (VGO) and automatic transmission fluid (ATF). It operates retail outlets under the HiQ brand. It has design capacity to process approximately 15 million metric tons per annum and over two hydrocrackers producing diesel. It has over two catalytic reformers producing unleaded petrol of high octane. It offers petroleum and petrochemical products to consumers in various industries, such as mining, power, agriculture, fertilizers and paint.
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