MRPL surges 13% on heavy volumes; stock zooms 58% in April

The stock hit over three-year high of Rs 65.45, after rallying 13% on the BSE in Wednesday's trade, on the back of heavy volumes.

Shares of Mangalore Refinery & Petrochemicals (MRPL) hit over three-year high of Rs 65.45, after it rallied 13 per cent on the BSE in Wednesday’s trade, on the back of heavy volumes. The stock of state-owned refineries & marketing company surged 24 per cent in the past two trading days. Earlier, the stock quoted its highest level in March 2019.

In the past 12 trading days, the market price of MRPL has zoomed 58 per cent so far in April, as compared to 2.7 per cent decline in the S&P BSE Sensex. The trading volumes on the counter jumped nearly three-fold as around 49 million shares changed hands on the NSE and BSE.

MRPL is engaged in the business of refining crude oil. The company is a subsidiary of Oil and Natural Gas Corporation Limited (ONGC) which holds 71.63 per cent equity shares.

For October-December quarter (Q3FY22), MRPL had reported consolidated net profit of Rs 589 crore as against net loss of Rs 214 crore supported by higher crude output and better gross refining margins (GRMs). MRPL took multiple initiatives to improve the revenue from marketing margins in domestic, exports and B2B (business to business) arrangements.

The capacity utilization of the refinery improved in nine month (April-December) 9MFY22 to 95 per cent, driven by demand recovery despite minor impact in H1FY22 due to shutdown. The utilisation of the polypropylene unit also remained healthy in 9MFY22. The GRM also improved in 9MFY22 to $5.8/bbl compared with $2.25/bbl in 9MFY21 due to inventory gains and improved crack spreads.

Credit rating agency ICRA remains bullish over MRPL's merger with ONGC Mangalore Petrochemicals Limited (OMPL). Highlighting the rationale behind the optimistic stance, ICRA said, “Since MRPL’s refinery is located on the western coast of the country, close to the Mangalore port, it is logistically advantageous to source crude and export products. The merger with OMPL which is expected to be completed by Q4FY22, will diversify revenues and lower the exposure to the refining cycle. The combined entity will run its operations on an integrated basis, leading to operational synergies."

Meanwhile, analysts at Kotak Securities expect MRPL to report an earnings-per-share of Rs 6.8 in FY23E (unchanged) and Rs 8.3 in FY24E (earlier Rs 8). "With the commissioning of desalination plant, one of the major risks faced by the company with respect to water availability is reduced," the brokerage firm said.