Q3FY18 result highlights
Key positives: Strong utilisation and higher core GRMs yoy/qoq
Key negatives: PPU unit yet to get back to full utilisation.
Impact on financials: Unchanged post the results.
Valuations & view
MRPL is on a structural growth path, with this quarter also helped by inventory gains of Rs5.2bn, with performance of the refinery reflecting the improved configuration and higher capacity which is complimented by an improved crude sourcing slate. 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% by end of FY18E, we see further uptick in GRMs over FY18-19E. Coupled with the expected turn to profitability for subsidiary OMPL, profitability for MRPL should continue to expand over the next 2 years. Valuations of 6.9x FY20E EPS/4.2x 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, FY17 pay-out at 35%). 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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