MOSL: MRPL (Upgrade to Buy)-Expect better refining margins-Acquired 80-90% land for Phase-IV expansion for INR6b
MRPL: Expect better refining margins; Acquired 80-90% land for Phase-IV expansion for INR6b
(MRPL IN, Mkt Cap USD1.7b, CMP INR70, TP INR86, 23% Upside, Upgrade to Buy)
We hosted investors to visit MRPL and its subsidiary ONGC Mangalore Petrochemicals Ltd (OMPL) at Mangaluru, Karnataka. Key takeaways:
MRPL
- Until Aug’18, several secondary units of the refinery faced technical issues, which have been resolved; since then, the refinery is running at its optimal capacity. If crack spreads are normalized, we expect refining margin at ~USD8/bbl including the benefit from PPU.
- There was a landslide during the monsoons in FY18, which affected the evacuation of products, in turn affecting plant utilization.
- For smoother operations, railway sliding is being constructed for evacuation of petcoke.
- The company is planning a shutdown of CDU-2, PFCCU and the PPU in FY20 for transition to BS-VI and for higher production of rich naphtha.
- The refinery is ready for consumption of natural gas. It can consume up to 1mmscmd of gas for hydrogen generation and MRPL is open to consumption for power and heating requirements if it’s an economical option.
- It is setting up a desalination plant costing INR5.8b (to be commissioned in 2020) to take care of its water requirement for current and expected expansions.
- There is a marginal benefit in terms of yield for using Iranian crude; credit terms are higher for Iranian crude v/s other grades, but there are no other discounts.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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