MRPL reported its Q1FY17 numbers, which were above our estimates. The topline increased 24.7% QoQ to | 11590.7 crore (our estimate: | 9017.8 crore) mainly due to a change in accounting standards to IND-AS. EBITDA declined 20.6% QoQ to | 1221.2 crore and came in above our estimate of | 677.2 crore. Improvement in GRMs to $10/bbl in Q1FY17 from $8.2/bbl in Q4FY16 and above our estimate of $7.3/bbl in Q1FY17 mainly led to higher than estimated EBITDA. However, a decline in crude oil throughput by 19% due to water shortage led to lower volume of 3.7 MMTPA in Q1FY17 against 4.5 MMTPA in Q4FY16, which led to decline in the EBITDA QoQ. PAT during the quarter declined 46.8% QoQ to | 720.3 crore, above our estimate of | 355.8 crore. QoQ tax expense was higher at 36.6% in Q1FY17 vs. 1.8% QoQ, contributing to the decline in PAT QoQ.
Valuation: MRPL has lower policy leverage and lower gearing on the balance sheet among PSU refineries. With the improvement in operational performance, we expect the standalone company to deliver profits, thus creating value for shareholders in coming years. The performance of ONGC Mangalore Petrochemicals (OMPL) remains crucial in determining the overall company performance. For FY16, OMPL posted revenue of | 4187.6 crore and a loss of | 875.4 crore. However, the management has indicated that its performance would improve in the coming years. A scheme of amalgamation of MRPL with OMPL has been proposed for approval of various regulatory authorities. We value the stock at 6x FY18E EV/EBITDA multiple and OMPL at | 7.6/share to arrive at a target price of | 105.