MOSL: MRPL (Buy)-High inventory losses
MRPL: High inventory losses
(MRPL IN, Mkt Cap USD1.6b, CMP INR67, TP INR77, 16% Upside, Buy)
Core GRM of USD4.0/bbl came in marginally higher than our estimate of USD3.88/bbl. However, inventory loss was much higher, resulting in an EBITDA loss of INR5b, as against our estimate of a gain of INR1.2b. Forex gain stood at INR3.8b v/s INR2b in 3QFY18 and a loss of INR4b in 2QFY19. Led by inventory losses, MRPL reported a net adjusted loss of INR2.6b, as against our estimate of a gain of INR322m.
- Core GRM stood at USD4.0/bbl v/s benchmark Singapore GRM of USD4.3/bbl, USD6.8/bbl in 3QFY18, and USD2.29/bbl in 2QFY19. Inventory loss stood at USD4.63/bbl, resulting in a loss of USD0.63/bbl at the reported GRM level.
- Crude throughput stood at 4.38mmt (-2% YoY, +12% QoQ), implying 117% utilization in the quarter (v/s 4.49mmt in 3QFY18 and 3.91mmt in 2QFY19).
Valuation and view
- Post expansion, MRPL's Nelson complexity improved to ~9.5. The bottom upgradation through the DCU and the presence of the polypropylene plant were expected to result in a premium of USD2-3/bbl over Singapore complex GRM. However, the company's operating performance has not reflected this on a sustainable basis. The company attributes this to a series of technical problems.
- For 9MFY19, EBITDA stood at INR12.6b (-59% YoY) and PAT at INR155m (-99% YoY). Adjusting for the poorer-than-expected performance in 3QFY19 and lowering our estimates for 4QFY19, we cut our FY19 EPS estimate from INR4.6 to INR1.0.
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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