Sell MRPL - Motilal Oswal

MRPL 3QFY11: Above estimates, led by inventory gains and higher throughput; Valuations stretched; Sell

MRPL reported 3QFY11 EBITDA at Rs5.4b, up 92% YoY and 46% QoQ. Higher than estimated EBITDA was due to higher GRM at US$6/bbl.

Reported PAT stood at Rs3.1b (v/s est Rs2b), up 139% YoY and 70% QoQ.

MRPL reported GRM of US$6/bbl as against regional benchmark Singapore GRM of US$5.5/bbl. Crude throughput at 3.5mmt was up 22% QoQ and 3% YoY.

Other income of Rs482m includes forex gain of Rs80m. Staff cost was higher due to pay revisions and allowances of non-management employees.

We model GRM of US$5.4/bbl and US$5.2/bbl for FY12/13. MRPL being a standalone refiner is highly sensitive to GRM. For variation of US$1/bbl in GRM, FY12 EPS changes Rs1.7. We are increasing our FY11 EPS by 20% to factor in superior 3QFY11 reported numbers. The stock trades at 14.3x FY12E EPS of Rs4.7 and EV/EBITDA of 11.4x FY12E (v/s global average EV/EBITDA of 8x). Maintain Sell.

Source : Equity Bulls

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