11 August 2014
1QFY15 Results Update | Sector:
Oil & Gas
MRPL
BSE SENSEX
25,519
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
7,626
MRPL IN
1,752.6
81/26
-4/31/79
CMP: INR64
TP: INR65
Neutral
M.Cap. (INR b) / (USD b) 112.9/1.8
Financials & Valuation (INR Billion)
Y/E Mar
Net Sales
EBITDA
Adj PAT
EPS (INR)
Gr. (%)
BV/Sh.
(INR)
RoE (%)
RoCE (%)
P/E (x)
P/BV (X)
2015E 2016E 2017E
742.8
18.3
7.3
4.2
22.2
43.6
10.0
7.2
15.4
1.5
757.8
33.0
14.1
8.0
91.8
49.8
17.2
15.6
8.0
1.3
735.8
34.1
15.1
8.6
7.1
56.4
16.2
15.0
7.5
1.1
MRPL’s reported 1QFY15 EBITDA loss at INR-1.5b (est INR3.8b) was below estimate
led by GRM of USD0.66/bbl due to higher F&L (est USD3.4/bbl), and higher opex of
USD1.5/bbl (est of USD1.0/bbl). Reported net loss stood at INR-361m led by (a)
higher other income of INR2.2b, and (b) INR380m tax gain.
GRM at USD0.66/bbl impacted by integration issues:
MRPL reported GRM at
USD0.66/bbl (v/s 1QFY14 GRM of USD2.9/bbl and USD3.2/bbl in 4QFY14) was
lower than our estimate of USD3.4/bbl, due to higher Fuel and losses. Throughput
at 3.2mmt (est. of 3.35mmt) declined due to planned shutdown in the quarter. The
opex at USD1.5/bbl was higher than our estimate of USD1.0/bbl, due to power
plant commissioning and downstream unit shutdown.
MRPL’s Phase III project (INR150b) progress stands at 99.74% v/s 99.68% as on
April, 2014. Post the commissioning of DCU (Delayed Coker Unit), MRPL has been
selling petcoke from April 2014. PFCCU (Petro Fluidized Catalytic Cracking unit) and
the remaining one out of three trains of SRU (Sulphur Recovery Unit) is expected to
be completed in August 2014.
Higher other income at INR2.2b (7.6x YoY, +39% QoQ) due to complexity in Iran
crude purchase payment. MRPL expects to pay the remaining amount in the
coming quarters.
Polypropylene project progress is 96.3% v/s 95.6% in 4QFY14, and commissioning is
expected by 3QFY15 (v/s earlier estimate of 2QFY15).
We expect that post the commencement of full operations, benefit of high
complexity refinery will be seen from 3QFY15.
GRM outlook subdued:
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.
Valuation and view
MRPL being a standalone refiner is highly sensitive to GRM. For variation of USD1/bbl
in GRM, FY16 EPS changes ~30%. The stock trades at FY16E P/E of 8x and EV/EBITDA
of 5.3x. 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
Source: Company, MOSL
Operational Highlights
MRPL’s 1QFY15 crude throughput stood at 3.2mmt (v/s est of 3.35mmt), -2%
YoY and -17% QoQ.
1QFY15 GRM stood at USD0.66/bbl, v/s USD2.9/bbl in 1QFY14 and USD3.2/bbl
in 4QFY14.
MRPL’s GRM has declined below Singapore’s GRM led by higher fuel & loss on account of new capacity startup
Prem/(Disc) to Singapore
9.1
1.9
3.6
(1.7)
4.2
6.1
1.9
6.0
5.5
0.5
7.3
1.8
(5.5)
(7.4)
8.5
3.0
9.1
7.9
3.8
1.7
(0.4)
(4.1)
(4.2)
(10.9)
1QFY11
3QFY11
1QFY12
3QFY12
1QFY13
3QFY13
1QFY14
3QFY14
1QFY15
7.5
7.1
0.1
1.9
(4.4)
(7.1)
(3.7)
MRPL GRM (USD/bbl)
6.7
9.1
9.2
9.1
6.3
2.0
Singapore GRM (USD/bbl)
6.6
2.9
5.4
5.0
(0.4)
6.2
4.3
3.2
0.7
(3.0)
(5.5)
6.2
(0.6)
(4.9)
Source: Company, MOSL
11 August 2014
2

MRPL
1QFY15 throughput at 3.2mmt
Throughput (mmt)
118%
98%
97%
3.5
2.9
2.9
114%
106%
109%
99%
97%
88%
3.4
2.9
3.6
3.8
Utilization (%)
126%
116%
109%
98%
4.1
87%
3.7
3.3
3.8
3.8
3.2
100%
102%
85%
3.4
3.3
3.1
3.0
1QFY11
3QFY11
1QFY12
3QFY12
1QFY13
3QFY13
1QFY14
3QFY14
1QFY15
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. Post the
commissioning of DCU (Delayed Coker Unit), MRPL has been selling petcoke.
MRPL management expects overall increment of USD4/bbl in GRM, once all the
units of the project are on-line.
The management expects commissioning of PFCCU by end-August 2014 and
440KTA PP by end-October 2014. And, expects fuel losses to come down to 9%
once PFCCU goes on stream.
Total capex stands at INR150b. MRPL plans to spend INR18b/16b/14b in
2Q/3Q/4QFY15.
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, FY16 EPS changes ~50%.
The stock trades at FY16E P/E of 8x and EV/EBITDA of 5.3x. We value MRPL at
5.5x EV/EBITDA to arrive at a fair value of INR65/share. Maintain
Neutral.
11 August 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
6.3
5.3 5.8
3.9
2.5 2.6
3.7
5.8
5.8
Capacity (MMTPA)
FY04
FY06
FY08
FY10
FY12
FY14
FY16E
Vision
FY05
FY07
FY09
FY11
FY13
FY15E
FY17E
Source: Company, MOSL
EBITDA to increase led by improving GRMs…
EBITDA (INRb)
28
19
12
20
16
15
8
10
20
23
18
33 34
8.8
3.7
5.3
12.7
11.9 11.1 11.8
9.1
Source: Company, MOSL
…PAT shall be realized as the margins improve.
PAT (INRb)
14.1 15.1
7.3
6.0
(7.6)
FY05
FY07
FY09
FY11
FY13
FY15E
FY17E
FY05
FY07
FY09
FY11
FY13
FY15E
FY17E
Source: Company, MOSL
ROE and ROCE are expected to recover from the decade lows…
ROE
ROCE
50
40
30
20
10
0
(10)
(20)
FY05
FY07
FY09
FY11
FY13
FY15E
FY17E
Source: Company, MOSL
1 Yr frwd P/E at 9.6, lower than historical avg. and median P/E…
PE (x)
Avg(x)
Peak(x)
Median(x)
Min(x)
80
60
40
20
0
13.8
69.7
Negative
Earnings
Cycle
11.8
5.0
11.0
Source: Company, MOSL
Source: Company, MOSL
11 August 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.
The company has high sensitivity towards GRM due
to lack of integration (in upstream/downstream
businesses).
Recent developments
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.
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 FY15E P/E of 8x and EV/EBITDA of
5.3x. We value MRPL at 5.5x EV/EBITDA to arrive at a
fair value of INR65/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.
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.
Target price and recommendation
Variation
(%)
0.0
6.0
Current
Price (INR)
64
Target
Price (INR)
65
Upside
(%)
1.6
Reco
Neutral
MOSL
Forecast
4.2
8.0
Consensus
Forecast
4.2
7.6
EPS: MOSL forecast v/s consensus (INR)
FY14
FY15
Shareholding pattern (%)
Jun-14
Promoter
DII
FII
Others
88.6
3.1
0.6
7.8
Mar-14
88.6
3.1
0.5
7.9
Jun-13
88.6
2.6
0.6
8.2
Stock performance (1-year)
Notes: FII includes depository receipts
11 August 2014
5

MRPL
Financials and valuation
Income statement
Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
Min. Int. & Assoc. Share
Adj Cons PAT
2014
718.1
9.3
10.0
1.4
7.1
3.0
3.2
3.2
1.1
1.9
-1.9
-102.9
3.8
6.0
-175.0
0.0
3.8
2015E
742.8
3.4
18.3
2.5
6.9
11.3
5.5
4.8
0.0
10.6
3.3
31.0
7.3
7.3
22.2
0.0
7.3
(INR Billion)
2016E
757.8
2.0
33.0
4.4
8.8
24.2
5.2
1.4
0.0
20.4
6.3
31.0
14.1
14.1
91.8
0.0
14.1
2017E
735.8
-2.9
34.1
4.6
9.0
25.0
5.0
1.8
0.0
21.9
6.8
31.0
15.1
15.1
7.1
0.0
15.1
Ratios
Y/E Mar
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Leverage Ratios (%)
Net Debt/Equity (x)
2014
3.4
6.2
40.3
0.0
0.0
18.8
10.4
1.6
0.1
9.4
0.0
5.6
1.9
4.7
22.8
42.9
0.0
1.3
2015E
4.2
8.1
43.6
0.0
22.3
15.4
7.9
1.5
0.2
9.8
0.0
10.0
7.2
4.7
21.0
40.0
0.0
0.9
2016E
8.0
13.1
49.8
0.0
23.3
8.0
4.9
1.3
0.2
5.3
0.0
17.2
15.6
4.9
21.0
40.0
0.0
0.7
2017E
8.6
13.8
56.4
0.0
23.1
7.5
4.7
1.1
0.2
4.6
0.0
16.2
15.0
4.4
21.0
40.0
0.0
0.7
Balance sheet
Y/E Mar
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
2014
17.5
53.2
70.7
88.5
4.7
163.9
122.6
62.6
59.9
84.9
0.2
250.2
84.5
44.8
107.3
13.6
231.2
229.6
1.7
18.9
163.9
2015E
17.5
58.9
76.4
68.5
5.9
150.8
206.9
69.6
137.4
5.0
0.2
139.0
81.4
42.7
1.8
13.0
130.7
129.0
1.7
8.3
150.8
(INR Billion)
2016E
2017E
17.5
17.5
69.7
81.3
87.2
98.8
63.9
64.3
8.1
10.5
159.2
173.6
212.1
217.4
78.4
87.4
133.7
130.0
5.0
5.0
0.2
0.2
141.2
155.5
83.0
80.6
43.6
42.3
1.4
19.5
13.1
13.0
120.8
117.0
119.1
115.4
1.7
1.7
20.3
38.5
159.2
173.6
E: MOSL Estimates
Cash flow statement
Y/E Mar
OP/(Loss) before Tax
Depreciation
Others
Interest
Direct Taxes Paid
(Inc)/Dec in Wkg Cap
CF from Op. Activity
(Inc)/Dec in FA & CWIP
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax)
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
2014
4.1
7.1
0.0
3.2
-0.8
80.6
94.3
-18.6
0.0
0.0
-18.6
0.0
15.5
0.0
0.0
15.5
91.3
16.1
107.3
2015E
10.6
6.9
0.0
5.5
-2.1
-94.8
-73.9
-4.5
0.0
0.0
-4.5
0.0
-25.5
0.0
-1.6
-27.2
-105.5
107.3
1.8
(INR Billion)
2016E
20.4
8.8
0.0
5.2
-4.1
-12.5
17.9
-5.2
0.0
0.0
-5.2
0.0
-9.8
0.0
-3.3
-13.1
-0.4
1.8
1.4
2017E
21.9
9.0
0.0
5.0
-4.4
0.0
31.5
-5.3
0.0
0.0
-5.3
0.0
-4.6
0.0
-3.5
-8.1
18.1
1.4
19.5
11 August 2014
6

MRPL
NOTES
11 August 2014
7

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MRPL
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