MRPL Hits 52-Week High Gaining 18% Intra-day; Strength In GRMs Aid Gains

Mangalore Refinery and Petrochemicals in trade today (April 19, 2022) are buzzing in trade with gains of 18%, hitting day's and 52-week high price of Rs. 62.5. On the previous day too there has been seen action in the mid cap refiners including Chennai Petrochemicals.

There is a view that there is witnessed supply crunch in the refining capacity and this gives a rise to crack spreads. These spreads are generally on the products that move up. With it Singapore GRMs have hit 4-year high and this is in fact positive for refining companies in particular.

So, consequently companies' like MRPL tend to benefit on higher gross refining margins.

Further, Motilal Oswal in its report dated March 25 has maintained a 'Hold' on the stock and said it is to be seen whether the entity is able to capitalise on the strengthened GRMs. Our FY22 financials do not factor in possible inventory gains in 4Q as
most of it may be countered by a similar, but slower inventory loss in FY23."At our base GRM assumption of USD6.5/bbl in FY23, we estimate an EBITDA ofINR43b. Every USD1/bbl change in GRM, results in a 25% change in EBITDA. We estimate standalone net debt to fall to INR92b in FY23 from INR153b in FY21. An USD3/bbl improvement in GRM in FY23 will pare down its standalone debt to INR80b. Assuming no change in OMPL's net debt, this deleveraging may result ina sharp upside in the stock", added the brokerage.