MRPL - "Fx loss mars operational performance":: LKP

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MRPL earned core GRM of $ 4.84/bbl in Q2 FY12 vs. $ 4.3/bbl q-o-q & $ 3.82/bbl y-o-y; however, steep depreciation of the rupee against the US dollar resulted in forex loss of $ 3.15/bbl during Q2 FY12.

Strong operating performance negated by steep rupee depreciation

Core GRM jumped from $ 4.3/bbl in Q1 FY12 to $ 4.84/bbl in Q2 FY12, mirroring the improvement in Singapore complex GRMs from $ 8.5/bbl to $ 9.1/bbl in the same period. However, drastic depreciation of the rupee against the US dollar saw forex losses also leaping from ($ 0.76/bbl) to ($ 3.15/bbl) in the same period. Thus, gross GRM declined from $ 3/bbl in Q1 FY12 to $ 1.66/bbl in Q2 FY12.

Q2 FY12 throughput affected by CDU/VDU revamp

Throughput for Q2 FY12 was 3.08 MMT compared to 2.87 MMT in Q2 FY11. However, the same was lower than Q1 FY12 throughput of 3.3 MMT due to shutdown of 4.68 MMT CDU/VDU for facilitating final hook up job for revamp of the unit. The plant has been declared mechanically completed and the CDU/VDU has been brought back into operation. Also, the hydrocracker unit was shut down as per schedule for revamp work. The revamp job has been completed and the unit is back on stream.

Capacity expansion to improve performance significantly

Going forward, excellent product slate of the expanded refinery, due to reduction in fuel oil and introduction of polypropylene, is expected to result in GRM jumping by ~$ 3.5/bbl during FY12-13. Realization for PP is currently ~$ 1500/ton, which is almost double that of other refined products. We estimate GRM of $ 5.1/bbl and $ 8.7/bbl in FY12 & FY13 respectively. Commissioning of SPM is expected to result in lower transportation costs and corresponding increase in GRM. GRM will be even significantly higher if the company is granted the various tax incentives for its expanded refinery.

We increase our FY12 revenue estimate to Rs 446,623.3 mn due to higher than expected throughput during Q2 FY12. We expect EBITDA to double from Rs 16,803.6 mn in FY12 to Rs 32,557.9 mn in FY13. We estimate PAT of Rs 9,186 mn & Rs 12,658.8 mn in FY12 & FY13 respectively. We revise our FY12 & FY13 EPS estimates to Rs 5.2 & Rs 7.2 respectively.

Valuation

We value MRPL using a target EV/EBITDA multiple of 6x on FY13E EBITDA and reiterate BUY with a target price of Rs 81, which translates to upside of above 30%.