7 February 2017
3QFY17 Results Update | Sector: Oil & Gas
MRPL
BSE SENSEX
28,335
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
S&P CNX
8,768
MRPL IN
1,753
195.9 / 2.9
116 / 52
-3/44/63
106
11.4
Downgrade to Neutral
EBITDA below est.; forex loss lowers PAT further
MRPL reported 3QFY17 EBITDA of INR13.1b (excl. forex loss of INR1.6b; est. of
INR15.7b; +46% QoQ, +157% YoY), led by lower-than-estimated GRM of
USD7.43/bbl (est. of USD9.3/bbl). Interest cost came in at INR1.4b (est. of
INR1.1b, +25% QoQ, -10% YoY). Other income of INR636m (-31% QoQ, -61%
YoY) missed estimate of INR745m. PAT came in at INR5.7b (est. of INR10.9b,
+36% QoQ, +92% YoY).
Core GRM below estimates:
Core GRM stood at USD5.1/bbl (est. of
USD7.0/bbl), as against USD5.5/bbl in 2QFY17 and USD8.37/bbl in 3QFY16.
GRM has been lower due to the 36-day shutdown of HCU-1 and 5-day
technical shutdown of the polypropylene unit. The company reported
inventory gain of USD2.43/bbl v/s loss of USD0.9/bbl and USD3.57/bbl in
2QFY17 and 3QFY16, respectively. However, according to management,
HCU-1 is up and running, while the polypropylene unit is also running at
+80% utilization since January 2017.
Crude throughput stood at 4.4mmt (+8% QoQ, +14% YoY), reflecting 116%
utilization in the quarter. We believe that the refinery should stabilize at
these levels.
Debt stood at INR70b, against which it has cash balance of INR23.5b. Iran
outstanding payment was only USD102m as of December 2016.
Valuation and view:
Barring such unforeseen technical problems (as seen in this
quarter), we believe that the refinery should be able to report GRM of
USD6.7/bbl in FY18/19. We expect strong operating cash flow of INR30b each
year, excluding working capital changes. The stock trades at 8.1x FY19E EPS and
EV of 4.0x FY19E EBITDA. We value the stock at EV of 5.5x FY19E EBITDA to
arrive at a fair value of INR94/share for the standalone refinery and add INR20
for OMPL (2% upside). The stock has climbed 29% since its last result
announcement. We thus downgrade MRPL to
Neutral with a TP of INR114.
4Q
92,929
-17.6
77,565
15,364
16.5
2,452
1,462
2,394
13,845
77
13,768
343
2
13,424
13,499
15.4
14.5
4.4
9.0
1Q
84,288
-25.5
72,076
12,212
14.5
1,707
1,465
2,295
11,335
0
11,335
4,155
37
7,181
7,181
35.9
8.5
3.7
5.3
FY16 FY17E
FY17
2Q
3Q
4QE
99,690 114,753 124,927 396,474 423,657
-2.5
30.1
34.4
-31.2
6.9
91,835 103,277 113,979 378,593 381,166
7,855 11,476 10,949 17,881 42,491
7.9
10.0
8.8
4.5
10.0
1,681
1,702
1,814
7,122
6,903
1,115
1,395
1,433
5,867
5,409
926
636
682
8,572
4,540
5,984
9,015
8,384 13,464 34,718
0
0
0
1,830
0
5,984
9,015
8,384 11,634 34,718
1,826
3,355
2,794
343 12,130
31
37
33
3
35
4,159
5,660
5,589 11,291 22,588
4,159
5,660
5,589 13,067 22,588
-146.5
91.8
-58.6 -175.2
72.9
4.2
4.9
4.5
3.3
5.3
4.0
5.5
4.2
5.1
4.0
6.9
15.6
6.9
15.9
4.8
(INR Million)
FY17
Var. vs
3QE
est
118,494
-3%
34.4
102,761
1%
15,733
-27%
13.3
1,758
-3%
1,076
30%
745
-15%
13,645
-34%
0
13,645
-34%
2,720
23%
20
10,925
-48%
10,925
-48%
265.3
9.2
4.0
9.3
6%
-45%
CMP: INR112 TP: INR114(+2%)
Financials & Valuations (INR b)
Y/E Mar
2016 2017E
396.5
423.7
Net Sales
17.9
42.5
EBITDA
13.3
22.6
PAT
7.6
12.9
EPS (INR)
NA
70.2
Gr. (%)
36.6
46.5
BV/Sh (INR)
22.6
31.0
RoE (%)
14.3
18.6
RoCE (%)
14.8
8.7
P/E (x)
3.1
2.4
P/BV (x)
2018E
552.9
43.9
22.2
12.7
(1.8)
56.2
24.7
16.7
8.8
2.0
Estimate change
TP change
Rating change
Standalone - Quarterly Earning Model
Y/E March
Net Sales
YoY Cha nge (%)
Tota l Expendi ture
EBITDA
Ma rgi ns (%)
Depreci a ti on
Interes t
Other Income
PBT before EO expense
Extra -Ord expens e
PBT
Ta x
Ra te (%)
Reported PAT
Adj PAT
YoY Cha nge (%)
Ma rgi ns (%)
Key Assumptions
Refi ni ng throughput (mmt)
GRM (USD/bbl )
E: MOSL Es ti ma tes
1Q
113,148
-28.1
105,954
7,194
6.4
1,482
1,223
2,140
6,629
1,542
5,087
1,032
20
4,055
5,284
-1,563.8
4.7
3.9
5.1
FY16
2Q
3Q
102,211 88,187
-35.8 -40.1
111,353 83,721
-9,142 4,466
-8.9
5.1
1,593 1,596
1,627 1,555
2,402 1,636
-9,961 2,951
205
6
-10,166 2,945
-1,032
0
10
0
-9,134 2,945
-8,950 2,951
-8.2 -115.6
-8.8
3.3
3.5
5.3
3.8
8.4
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Swarnendu Bhushan
(Swarnendu.Bhushan@MotilalOswal.com); +91 22 6129 1529
Abhinil Dahiwale
(Abhinil.Dahiwale@motilaloswal.com); +91 22 3980 4309
 Motilal Oswal Financial Services
MRPL
Exhibit 1: MRPL -- Key Operating and Financial Performance
(INR million)
Key Prameters
Exchange rate (INR/USD)
Crude cost (USD/bbl)
Throughput (mmt)
GRM (USD/bbl)
Singapore GRM (USD/bbl)
Premium / (disc.) (USD/bbl)
Key Financials
Net Sales
Less: Expenses
EBITDA
EBITDA Margin (%)
Depreciation
Other Income
Interest
PBT b/f exceptional
Forex gain/(loss)
Exceptionals
PBT
Income tax
Reported PAT
PAT Margin (%)
EPS (INR)
4QFY15
62.3
52.0
4.1
8.6
8.6
(0.0)
112,726
100,154
12,572
11.15%
1,489
2,018
1,138
11,963
0
0
11,963
-265
11,698
10.4%
6.67
1QFY16
63.5
54.1
3.9
5.1
8.0
(2.9)
113,148
105,954
7,194
6.36%
1,482
2,140
1,223
6,629
-3,103
1,542
6,629
-1,032
5,597
4.9%
3.19
2QFY16
64.9
62.2
3.5
5.3
6.3
(1.0)
102,211
111,353
-9,142
-8.94%
1,593
2,402
1,627
-9,961
-7,026
205
-9,961
1,032
-8,929
-8.7%
(5.09)
3QFY16
65.9
41.5
3.8
8.4
7.8
0.6
88,187
83,721
4,466
5.06%
1,596
1,636
1,555
2,951
-1,631
6
2,951
0
2,951
3.3%
1.68
4QFY16
67.5
34.6
4.4
9.0
7.8
1.3
92,929
77,565
15,364
16.53%
2,452
2,394
1,462
13,845
-143
77
13,845
-343
13,501
14.5%
7.70
1QFY17
66.9
36.7
3.7
5.3
5.0
0.3
84,288
72,076
12,212
14.49%
1,707
2,295
1,465
11,335
-3,631
0
11,335
-4,155
7,181
8.5%
4.10
2QFY17
67.0
45.4
4.0
5.5
5.1
0.4
99,690
91,835
7,855
7.88%
1,681
926
1,115
5,984
1,585
0
5,984
-1,826
4,159
4.2%
2.37
3QFY17
67.4
46.7
4.2
5.1
6.7
(1.6)
114,753
103,277
11,476
10.00%
1,702
636
1,395
9,015
-1,597
0
9,015
-3,355
5,660
4.9%
3.23
YoY(%)
2%
13%
11%
-39%
-14%
-386%
30%
23%
157%
7%
-61%
QoQ(%)
1%
3%
5%
-7%
32%
-504%
15%
12%
46%
1%
-31%
205%
92%
51%
36%
Source: Company, MOSL
Exhibit 2: MRPL’s reported GRM stood at USD5.1/bbl vs Singapore GRM at USD6.7/bbl
Prem/(Disc) to Singapore
9.10
6.70
4.2
3.3
9.00
6.50
5.40
6.40
4.30
5.1
(1.0)
(1.3)
(4.9)
(3.4)
(6.9)
4QFY13
2QFY14
(4.7)
(4.6)
(5.3)
(4.4)
5.70
6.7
4.80
8.60
6.30
5.1
0.4
(0.0)
(2.9)
(5.3)
4QFY14
5.3
0.6
(1.0)
MRPL Core GRM (USD/bbl)
8.6
8.00
6.30
7.80
7.75
1.3
Singapore GRM (USD/bbl)
8.4
9.0
5.3
5.00
0.4
0.3
(1.6)
5.5
6.73
5.1
2.1
1.8
0.8
5.10
0.4
0.4
2QFY13
2QFY15
4QFY15
2QFY16
4QFY16
2QFY17
Source: Company, MOSL
7 February 2017
2
 Motilal Oswal Financial Services
MRPL
Exhibit 3: MRPL 3QFY17 throughput at 4.35mmt implying 116% capacity utilization
Throughput (mmt)
96%
102%
110%
87%
98%
100% 102%
85%
93%
103%
Utilization (%)
110%
104%
92%
102%
117%
98%
107%
116%
3.59
2QFY13
3.81
4.12
4QFY13
3.27
3.69
2QFY14
3.75
3.84
4QFY14
3.20
3.47
2QFY15
3.86
4.12
4QFY15
3.89
3.46
2QFY16
3.82
4.40
4QFY16
3.66
4.03
2QFY17
4.35
Source: Company, MOSL
Valuation and View
Key risks include slowdown in the global petroleum demand as it would impact
GRM. MRPL being a standalone refiner is highly sensitive to GRM.
The stock trades at 8.1x FY19E EPS and at EV of 4.0x FY19E EBITDA. We value
the stock at EV of 5.5x FY19E EBITDA to arrive at a fair value of INR94/share for
the standalone refinery and add INR20 for OMPL. (2% upside). The stock has run
up 29% since the last result. As a result of the same, we downgrade the stock to
Neutral with a target of INR114.
7 February 2017
3
 Motilal Oswal Financial Services
MRPL
Story in charts
Exhibit 4: MRPL has recently completed its nameplate
capacity expansion from 9.5mmt to 15.5mmmt along with
complexity increase
Capacity (MMTPA)
Exhibit 5: …Higher complexity has started contributing to
higher GRMs and is likely to continue
Core GRM (USD/bbl)
6.9
5.7
3.2
3.5
2.9
1.7
3.4
6.7
6.7
Source: Company, MOSL
Source: Company, MOSL
Exhibit 6: EBITDA to increase led by improving GRMs…
EBITDA (INRb)
42.5 43.9 45.2
17.2 22.0 22.3 16.3 20.3 16.3
3.2
10.2
17.9
Exhibit 7: …PAT shall be realized as the margins improve
PAT (INRb)
22.6 22.2 24.3
6.6
14.0 12.3 12.0 11.8
9.1
6.0
11.5
(20.7)
(7.6)
(17.1)
Source: Company, MOSL
Source: Company, MOSL
Exhibit 8: RoE and RoCE are expected to recover from the
decade lows… (%)
60
40
20
0
(20)
(40)
17.1
ROE
ROCE
Exhibit 9: 1-Year forward P/E Chart
60
PE (x)
Peak(x)
51.1
Negative
Earnings
Cycle
Avg(x)
Min(x)
22.5
50
40
30
20
10
0
10.6
3.5
6.1
Source: Company, MOSL
Source: Company, MOSL
7 February 2017
4
 Motilal Oswal Financial Services
MRPL
Financials and Valuations
Standalone - Income Statement
Y/E March
Total Income from Operations
Change (%)
Raw Materials
Other Expenses
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Total Tax
Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY13
657,170
22.2
642,840
11,119
653,959
99.5
3,211
0.5
6,044
-2,833
3,286
906
-5,213
445
-4,769
2,801
-58.7
-7,569
-8,275
-190.8
-1.3
FY14
718,264
9.3
701,784
6,309
708,093
98.6
10,171
1.4
7,064
3,107
3,214
3,086
2,978
1,119
4,097
-1,915
-46.7
6,012
4,370
-152.8
0.6
FY15
574,771
-20.0
578,476
17,035
595,512
103.6
-20,741
-3.6
4,986
-25,727
4,071
7,905
-21,893
334
-21,559
-4,437
20.6
-17,122
-17,388
-497.9
-3.0
FY16
396,474
-31.0
352,348
26,230
378,578
95.5
17,896
4.5
7,124
10,772
5,778
8,571
13,565
-1,830
11,735
254
2.2
11,482
13,272
-176.3
3.3
FY17E
423,657
6.9
363,617
17,550
381,166
90.0
42,491
10.0
6,903
35,588
5,409
4,540
34,718
0
34,718
12,130
34.9
22,588
22,588
70.2
5.3
FY18E
552,872
30.5
492,576
16,419
508,995
92.1
43,877
7.9
7,053
36,823
5,080
1,539
33,282
0
33,282
11,093
33.3
22,189
22,189
-1.8
4.0
FY19E
568,788
2.9
506,650
16,888
523,538
92.0
45,250
8.0
7,203
38,047
4,000
2,382
36,429
0
36,429
12,142
33.3
24,287
24,287
9.5
4.3
Standalone - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Total Loans
Deferred Tax Liabilities
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Provisions
Net Current Assets
Misc Expenditure
Appl. of Funds
E: MOSL Estimates
FY13
17,527
47,150
64,677
69,798
7,343
141,818
113,385
55,578
57,806
75,545
150
133,511
67,153
39,727
16,059
10,573
125,194
123,739
1,455
8,317
0
141,818
FY14
17,527
53,162
70,689
88,536
4,703
163,927
122,510
62,596
59,914
85,515
150
249,597
84,490
44,811
106,723
13,573
231,249
229,568
1,681
18,347
0
163,927
FY15
17,527
35,523
53,050
78,755
0
131,805
209,416
68,323
141,092
13,775
13,497
174,993
33,996
23,588
102,687
14,722
211,553
209,109
2,444
-36,559
0
131,805
FY16
17,527
46,678
64,205
68,230
806
133,241
225,105
75,890
149,215
1,831
13,497
209,010
31,967
23,690
137,127
16,226
240,312
236,364
3,947
-31,301
0
133,241
FY17E
17,527
63,981
81,507
67,000
806
149,314
230,105
82,793
147,312
6,831
13,497
76,802
29,264
21,577
19,296
6,665
95,127
93,088
2,039
-18,325
0
149,314
FY18E
17,527
80,978
98,505
60,000
806
159,311
235,105
89,846
145,258
11,831
13,497
116,372
54,406
39,011
15,264
7,689
127,647
125,506
2,141
-11,275
0
159,311
FY19E
17,527
99,582
117,109
40,000
806
157,915
240,105
97,049
143,055
16,831
13,497
115,872
31,655
23,321
53,016
7,880
131,340
129,092
2,248
-15,468
0
157,915
7 February 2017
5
 Motilal Oswal Financial Services
MRPL
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Fixed Asset Turnover (x)
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Net Debt/Equity
FY13
-4.7
-1.3
36.9
0.0
0.0
FY14
2.5
6.5
40.3
0.0
0.0
FY15
-9.9
-7.1
30.3
0.0
0.0
-11.3
-15.8
3.7
0.3
-8.3
0.0
11.2
-28.1
-9.7
153.5
2.7
4.4
22
15
133
0.8
-6.3
-0.7
FY16
7.6
11.6
36.6
0.0
0.0
14.8
9.6
3.1
0.3
7.1
0.0
25.8
22.6
14.3
-121.4
1.8
3.0
29
22
218
0.9
1.9
-1.3
FY17E
12.9
16.8
46.5
2.6
23.4
8.7
6.7
2.4
0.6
5.7
2.3
-63.5
31.0
18.6
51.2
1.8
2.8
25
19
80
0.8
6.6
0.4
FY18E
12.7
16.7
56.2
2.5
23.4
8.8
6.7
2.0
0.4
5.5
2.3
4.7
24.7
16.7
21.5
2.4
3.5
36
26
83
0.9
7.2
0.3
FY19E
13.9
18.0
66.8
2.8
23.4
8.1
6.2
1.7
0.3
4.1
2.5
36.2
22.5
17.1
26.2
2.4
3.6
20
15
83
0.9
9.5
-0.2
0.0
-10.7
-12.1
-2.3
-9.9
5.8
4.6
37
22
69
1.1
-0.9
0.8
0.0
41.0
6.5
6.2
42.2
5.9
4.4
43
23
117
1.1
1.0
-0.3
Standalone - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY13
-4,769
6,044
-2,801
7,822
6,297
2,812
9,109
-27,905
-18,797
273
-27,632
0
12,281
0
-46
12,235
-6,289
22,347
16,059
FY14
4,097
7,064
1,915
80,634
93,710
-2,641
91,070
-19,143
71,927
0
-19,143
0
18,738
0
0
18,738
90,665
16,059
106,723
FY15
-21,559
4,986
4,437
50,871
38,734
-4,703
34,032
-14,424
19,608
-13,347
-27,771
0
-9,780
0
-517
-10,297
-4,036
106,723
102,687
FY16
11,735
7,124
-254
29,182
47,788
806
48,594
-3,302
45,292
0
-3,302
0
-10,525
0
-327
-10,852
34,440
102,687
137,127
FY17E
34,718
6,903
-12,130
-130,807
-101,316
0
-101,316
-10,000
-111,316
0
-10,000
0
-1,230
-5,285
0
-6,515
-117,831
137,127
19,296
(INR Million)
FY18E
33,282
7,053
-11,093
-11,082
18,160
0
18,160
-10,000
8,160
0
-10,000
0
-7,000
-5,192
0
-12,192
-4,032
19,296
15,264
FY19E
36,429
7,203
-12,142
41,944
73,434
0
73,434
-10,000
63,434
0
-10,000
0
-20,000
-5,683
0
-25,683
37,751
15,264
53,016
7 February 2017
6
 Motilal Oswal Financial Services
MRPL
Corporate 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.
Exhibit 1: Sensex rebased
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%)
Dec-16
Promoter
DII
FII
Others
88.6
3.3
1.7
6.4
Sep-16
88.6
3.5
1.1
6.8
Dec-15
88.6
3.4
0.7
7.3
Source: Capitaline
Exhibit 3: Top holders
Holder Name
NA
NA
NA
NA
NA
% Holding
0.0
0.0
0.0
0.0
0.0
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
D K Sarraf
H Kumar
A K Sahoo
Dinesh Mishra
Designation
Chairman
Managing Director
Director (Finance)
Company Secretary
Exhibit 5: Directors
Name
Vinod S Shenoy
Perin Devi
Name
Diwakar Nath Misra
M Venkatesh
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
A Raghavendra Rao & Associates
Bandyopadhyaya Bhaumik & Co
K Varghese & Co
Sreedhar, Suresh & Rajagopalan
Ullas Kumar Melinamogaru &
Associates
Type
Statutory
Cost Auditor
Internal
Statutory
Secretarial Audit
Source: Capitaline
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY17
FY18
FY19
MOSL
forecast
12.9
12.7
13.9
Consensus
forecast
13.3
13.0
14.8
Variation (%)
-3.3
-2.4
-6.1
Source: Bloomberg
7 February 2017
7
 Motilal Oswal Financial Services
MRPL
7 February 2017
8