Result Update: Mangalore Refinery and Petrochemicals Ltd. (MRPL) - ACCUMULATE - TP Rs.144 - Kotak

- Despite marginal decline in crude throughput, MRPL has posted highest ever quarterly net profit. It has reported a PAT of Rs.19.4 bn in Q4FY17, up 243% qoq and 44% yoy mainly due to strong operating performance, forex gain and significant provision written back (one-off). The company has declared a final dividend of Rs.6/share, resulting in a dividend yield of 4.4%.

- Due to shut down of one of the primary unit for 5 days in Q4FY17, the company has reported marginally lower crude throughput of 4.23 mmt, down by 3% yoy and 6.4% qoq. However, MRPL's refining margin stood higher at US$8.25/bbl in Q4FY17 as compared to US$7.43/bbl in Q3FY17 and $8.24/bbl in Q4FY16.

- We expect MRPL's financial performance to improve further on account of strong margins in the medium term, improvement in operational performance and ongoing improvement in financial metrics. The expansion of capacity to 15 mmtpa from 11.8 mmtpa and increase in complexity to +9 NCI (from 5.5 earlier) implies that distillate yield (including propylene) will expand, going forward.

- Going ahead, we expect MRPL's profitability to improve on account of i). Improved product mix, ii). Better refining margins iii). Economies of scale, iv). Forward integration - Polypropylene plant and v). Various tax benefits. At current price of Rs.135, the stock is trading at 8.2x P/E and 1.9x P/B multiples on FY19E earnings. We introduce FY19E earnings and roll-forward our target prices based on FY19E. We maintain ACCUMULATE recommendation with a revised price target of Rs.144 (earlier Rs.119), valuing it at 5.5x FY19E EV/EBIDTA.

Shares of MANGALORE REFINERY & PETROCHEMICALS LTD. was last trading in BSE at Rs.133.85 as compared to the previous close of Rs. 136.35. The total number of shares traded during the day was 328311 in over 2464 trades.

The stock hit an intraday high of Rs. 138.75 and intraday low of 132.3. The net turnover during the day was Rs. 44616755.

Source : Equity Bulls

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