20 May 2014
4QFY14 Results Update | Sector:
Oil & Gas
MRPL
BSE SENSEX
24,377
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
7,276
MRPL IN
1,752.6
119.2/2.0
69/26
22/42/26
CMP: INR68
TP: INR72
Neutral
Financial & Valuations (INR b)
2014 2015E
Y/E MAR
Sales
EBITDA
Adj. PAT
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh.(INR)
RoE (%)
RoCE (%)
Payout (%)
Valuation
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
718.1
10.0
6.0
3.4
-175.0
40
8.9
4.4
0.0
19.7
1.7
9.9
0.0
755.3
29.1
10.4
5.9
72.4
45
13.9
13.9
23.7
11.4
1.5
6.3
1.8
2016E
784.6
34.9
13.6
7.8
31.3
51
16.3
18.8
24.1
8.7
1.3
5.0
2.4
MRPL’s reported 4QFY14 EBITDA at INR3.6b (est INR5.2b) was below estimate led
by GRM of USD3.2/bbl (est USD3.4/bbl) and higher opex of USD1.1/bbl (est of
USD0.9/bbl). However, PAT was above estimate at INR10.7b (est INR5.0b) led by
(a) higher other income of INR1.6b (led by cash held for Iran’s prior period crude
purchases), (b) forex gain of INR5.75b and (c) INR2.8b gain from deferred tax
asset recognition.
GRM at USD3.2/bbl compared to Singapore GRM of USD6.2/bbl:
MRPL
reported GRM at USD3.2/bbl (v/s 4QFY13 GRM of USD2.0/bbl and USD-0.6/bbl
in 3QFY14) was lower than our estimate of USD3.4/bbl. Throughput for the
quarter was marginally above estimates at 3.84mmt (est. of 3.74mmt)
MRPL’s Phase III project (INR150b) progress stands at 99.68% v/s 99.5% as on
Jan 15, 2014. (a) DCU (Delayed Coker Unit) has been commissioned and has
started production, and (b) PFCCU (Petro Fluidised Catalytic Cracking unit) is
expected to be completed during 1HFY15 (v/s earlier expectation of 4QFY14).
Due to complexity in payment towards crude purchase from Iran, MRPL is yet to
make payments for prior period crude purchases. As on March 31, 2014, of its
balance sheet cash of INR107b; ~INR80b is towards payable for Iran crude.
Polypropylene project progress is 95.6% v/s 93.4% in 3QFY14, and
commissioning is expected by 2QFY15 (v/s earlier estimate of 1QFY15).
We believe, post commencement of full operations, the benefit of the project
and increased refinery complexity will be seen from 2HFY15.
GRM outlook rangebound:
While the near term GRM’s are expected to remain
range-bound, medium term outlook remains subdued due to refinery capacity
additions exceeding oil demand growth. We expect GRMs to be volatile
(occasional spurts) due to occasional bunching up of shutdowns.
Valuation and view
MRPL being a standalone refiner is highly sensitive to GRM. For variation of
USD1/bbl in GRM, FY14 EPS changes ~25%. The stock trades at FY16E P/E of
8.7x and EV/EBITDA of 5x.
Neutral.
Harshad Borawake
(HarshadBorawake@MotilalOswal.com); +91 22 3982 5432
Nitish Rathi
(Nitish.Rathi@MotilalOswal.com); +91 22 3982 5558
Investors are advised to refer through disclosures made at the end of the Research Report.

MRPL
MRPL: Key Operating and Financial Performance
(INR million)
Key Prameters
Exchange rate (INR/USD)
Brent Crude (USD/bbl)
Throughput (mmt)
GRM (USD/bbl)
Singapore GRM (USD/bbl)
Premium / (disc.) (USD/bbl)
Key Financials
Net Sales
Sales (USD/bbl)
Less: Expenses
EBITDA
EBITDA (USD/bbl)
EBITDA Margin (%)
Depreciation
Other Income
4QFY13
54.2
113.5
4.1
2.0
9.1
(7.1)
185,795
112.9
184,367
1,428
0.9
0.8%
1,663
105
1QFY14
55.9
102.8
3.3
2.9
6.6
(3.7)
152,659
113.3
150,977
1,683
1.2
1.1%
1,688
293
2QFY14
62.5
111.0
3.7
5.0
5.4
(0.4)
187,623
110.4
180,319
7,305
4.3
3.9%
1,761
335
3QFY14
62.0
109.2
3.8
(0.6)
4.3
(4.9)
186,547
108.9
189,133
(2,585)
(1.5)
-1.4%
1,845
1,005
4QFY14 YoY (%) QoQ (%)
62.0
108.2
3.8
3.2
6.2
(3.0)
191,275
109.0
187,645
3,630
2.1
1.9%
1,771
1,612
6%
1438%
-4% Depreciation is increasing as the new units
are being commissioned
60% Higher other income led by high cash balance
on account of yet to be released payment for
crude purchases from Iran
nm
nm
Deferred tax asset recognization of INR2.8b in
4QFY14
nm
14%
-5%
-7%
61%
-32%
Remarks
0%
-1%
2% Plant upsets have led throughputs down in
FY14
nm
44%
3%
-3%
2%
154%
3%
0%
-1% Already commissioned units operating at sub-
optimal capacity are driving OPEX higher
nm EBITDA has remained volatile led by GRM
movement
PBT
Income tax
PAT
PAT (USD/bbl)
PAT Margin (%)
EPS
465
(1,095)
(630)
(0.4)
0%
(0.4)
(4,539)
0
(4,539)
(3.4)
-3%
(2.6)
2,458
(100)
2,358
1.4
1%
1.3
(2,464)
(13)
(2,477)
(1.4)
-1%
(1.4)
8,642
2,028
10,670
6.1
6%
6.1
1760%
nm
nm
nm
nm
Source: Company, MOSL
Operational highlights
MRPL’s 4QFY14 crude throughput stood at 3.84mmt (v/s est of 3.74mmt), -6.8%
YoY and +2.4% QoQ.
4QFY14 GRM stood at USD3.2/bbl, v/s USD2.0/bbl in 4QFY13 and USD-0.6/bbl in
3QFY14.
MRPL’s GRM has remained below Singapore’s GRM due to lower refining complexity
Prem/(Disc) to Singapore
9.1
5.3
4.9
0.3
3.6
1.9
(1.7)
(5.5)
(7.4)
(4.1)
6.1
4.2
1.9
6.0
5.5
0.5
7.3
1.8
8.5
3.0
9.1
1.7
7.9
3.8
MRPL GRM (USD/bbl)
7.5
7.1
(0.4)
6.7
9.1
6.3
9.2
0.1
(4.2)
(10.9)
4QFY10
2QFY11
4QFY11
2QFY12
4QFY12
2QFY13
4QFY13
2QFY14
4QFY14
(4.4)
1.9
Singapore GRM (USD/bbl)
9.1
6.6
4.3
5.4
2.0
5.0
2.9
(0.6)
(0.4)
(3.7)
(4.9)
(7.1)
6.2
3.2
(3.0)
Source: Company, MOSL
20 May 2014
2

MRPL
MRPL’s 4QFY14 throughput was at 3.84mmt (-7% YoY; 2% QoQ)
Throughput (mmt)
118%
104%
98%
97%
3.5
3.1
2.9
2.9
114%
106%
109%
99%
97%
88%
3.4
2.9
3.6
3.8
Utilization (%)
109%
116%
126%
98%
4.1
87%
3.7
3.3
3.8
3.8
100%
102%
3.4
3.3
3.1
3.0
4QFY10
2QFY11
4QFY11
2QFY12
4QFY12
2QFY13
4QFY13
2QFY14
4QFY14
Source: Company, MOSL
Update on Expansion Project
Delayed Coker Unit (DCU) of 3.0MMTPA, a part of the Refinery Up-gradation
cum Expansion Project, went on stream on April 03, 2014. With this the FO
production will come down with corresponding increase in high value products.
As per the management, DCU will increase GRM by USD2/bbl upon processing
heavy crude, which is expected from May 2014. And they expect overall
increment of USD4/bbl once all the units of the project are on-line.
The management expects commissioning of PFCCU by end-May’ 14 and 440KTA
PP by end-July’14.
Total capex stands at INR150b, out of which INR115b has been spent.
MRPL upgradation cum expansion project, to decrease the heavies and increase the lights
Light distillates
7.6
19.7
Middle distillates
Heavies
9.7
11.8
52.1
F&L
52.4
20.3
Current
26.4
Post upgradation
Source: Company, MOSL
Valuation and view
MRPL being a standalone refiner is highly sensitive to GRM. For variation of
USD1/bbl in GRM, FY14 EPS changes ~25%.
We model with FY15 and FY16 GRM estimates at USD5.2/bbl and USD5.9/bbl
respectively.
The stock trades at FY16E P/E of 8.7x and EV/EBITDA of 5x. We value MRPL at
5.5x EV/EBITDA to arrive at a fair value of INR72/share. Maintain
Neutral.
20 May 2014
3

MRPL
Story in charts
MRPL has recently completed its nameplate capacity expansion
from 9.5mmt to 15.5mmmt along with complexity increase
…Higher complexity is expected to result in higher GRM from
2HFY15 onwards
GRM (USD/bbl)
7.0
5.7
4.8
3.7
2.4
6.3
5.3
5.8
3.9
2.5
2.6
5.2
5.9
Capacity (MMTPA)
FY04
FY06
FY08
FY10
FY12
FY14
FY16E
Vision
FY04
FY06
FY08
FY10
FY12
FY14
FY16E
Source: Company, MOSL
Source: Company, MOSL
EBITDA to increase led by improving GRMs…
EBITDA (INRb)
28
19
12
7
20
16
15
8
10
20
23
29
35
…PAT shall be realized as the margins improve.
PAT (INRb)
8.8
4.6
3.7
5.3
12.7 11.9
11.1 11.8
13.6
9.1
6.0
10.4
FY04
FY06
FY08
FY10
FY12
FY14
FY16E
FY04
FY06
FY08
FY10
(7.6)
FY12
FY14
FY16E
Source: Company, MOSL
Source: Company, MOSL
ROE and ROCE are expected to recover from the decade lows…
50
40
30
20
10
0
(10)
(20)
FY04
FY06
FY08
ROE
ROCE
1 Yr frwd P/E at 9.6, lower than historical avg. and median P/E…
80
60
40
20
0
13.8
PE (x)
Median(x)
Peak(x)
Min(x)
69.7
Negative
Earnings
Cycle
Avg(x)
11.8
5.0
11.0
FY10
FY12
FY14
FY16E
Source: Company, MOSL
Source: Company, MOSL
20 May 2014
4

MRPL
MRPL: an investment profile
Company description
MRPL (Bloomberg: MRPL) is an ONGC Group company,
with ONGC’s stake at 71.6%. It was set up in 1988 with
the initial crude processing capacity of 3.0MMTPA that
was later expanded to 9.7MMTPA and is now expanded
to 15mmtpa.
Key investment risks
Until the entire up-gradation and expansion project
phase-III comes on line the newly commissioned
units would incur higher per barrel depreciation and
operating costs due to sub-optimal capacity
utilization.
The company has high sensitivity towards GRM due
to lack of integration (in upstream/downstream
businesses).
Key investment arguments
MRPL is a pure play refinery as its earnings have
direct correlation with the refining margins.
Expect positive operational/financial performance
delta led by a) 25% capacity increase to 15mmtpa; b)
Nelson complexity rise from 5.5 to 9, leading to GRM
improvement; c) cost savings through SPM; and d)
fiscal benefits from state government Setting-up of
440 KTA of PP capacity in integration with Phase-III
and SPM (single Point Mooring) facility is going to
increase the company’s margins and reduce freight
costs.
We expect the benefit from the expanded, high
complex facility to accrue from 2HFY15.
Recent developments
The Delayed Coker Unit (DCU) of 3.0 MMTPA, which
is part of the Refinery upgradation and Expansion
Project, Phase-III went on stream on April 03, 20 14.
Valuation and view
The stock trades at FY16E P/E of 8.7x and EV/EBITDA
of 5x. We value MRPL at 5.5x EV/EBITDA to arrive at
a fair value of INR72/share. Maintain
Neutral.
Sector view
In the long term, outlook of international refining
margins remains weak since the planned capacity
additions seem to be exceeding the demand growth
for petroleum products.
The operational results will continue to be impacted
by the volatility in Indian Rupee Value and Crude
prices determining inventory gains/losses.
Target price and recommendation
Current
Price (INR)
68
Target
Price (INR)
72
Upside
(%)
5.9
Reco.
Neutral
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
FY15
FY16
5.9
7.8
Consensus
Forecast
4.6
8.5
Variation
(%)
27.9
-8.7
Shareholding pattern (%)
Mar-14
Promoter
Domestic Inst
Foreign
Others
88.6
3.1
1.0
7.4
Dec-13
88.6
2.9
1.0
7.5
Mar-13
88.6
2.7
1.0
7.7
Stock performance (1-year)
20 May 2014
5

MRPL
Financials and valuation
20 May 2014
6

MRPL
NOTES
20 May 2014
7

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MRPL
No
No
No
No
MRPL
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20 May 2014
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8