MRPL - Company Update - ACCUMULATE - TP Rs.138 - Kotak

- We remain positive on the refining space due to limited global capacity addition and expected improvement in global refining margins due to seasonal factors (winters). We expect MRPL's performance to improve from Q3FY18 onwards due to both higher crude throughput and better GRMs. The phase III expansion of MRPL has turnaround after five years. Further, we do not expect any major shutdowns in the near future as CDU-1 was under planned maintenance and CDU-3 (Phase III) was shut in Q2FY18, impacting its performance.

- The expansion of capacity to 15 mmtpa and increase in complexity to 10 NCI (from 5.5 earlier) implies that distillate yield (including propylene) will expand, going forward. MRPL has lined up capex plans for two major projects 1). Up-gradation of refinery to meet BS-VI norms by 2020, which recently received environmental clearance and 2). Further expansion of its capacity from 15 mmtpa to 25 mmtpa.

- 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, the stock is trading at 8.3x P/E and 2.1x P/B multiples on FY19E earnings. We maintain ACCUMULATE recommendation with a price target of Rs.138 (unchanged), valuing it at 6x FY19E EV/EBIDTA. We expect stock to remain in focus on the news flow of merger with HPCL, we opine.

Shares of MANGALORE REFINERY & PETROCHEMICALS LTD. was last trading in BSE at Rs.126.3 as compared to the previous close of Rs. 125.05. The total number of shares traded during the day was 95165 in over 738 trades.

The stock hit an intraday high of Rs. 127.5 and intraday low of 125. The net turnover during the day was Rs. 12047181.

Source : Equity Bulls

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