The Hindu Business Line : MRPL up on bullish undertone

THE Mangalore Refinery and Petrochemicals Ltd stock today attracted attention of a section of investors on fresh value propositions for medium to long-term. The stock finished at Rs 48.30, up 1.90 per cent, and recorded a traded quantity of 7.4 lakh shares on the NSE.

According to Mr Rajesh Agarwal of CD Equisearch, the stock's market valuation is attractive and the future appears to be loaded with possibilities of a number of positive developments.

Market analysts feel that prospect of better refining margin, access to better crude, better synergy and expansion plans have improved the growth prospects. The 2004-05 fourth quarter financial performance is likely to show a better net profit on account of falling interest costs and improving refining margin, industry insiders feel.

Following the take-over of controlling stake by ONGC and the debt restructuring thereafter, MRPL's interest cost reduction have helped the company to improve bottomline steadily quarter on quarter.

Industry insiders also pointed out that gross refining margin had been better by about one dollar at $5.5 a barrel in the first 9 months till 2004 end against that in 2003-04. In the fourth quarter of 2004-05, margins have gone up even further because of increased volatility in crude prices.

Industry sources confirmed that the Government seems amenable to the idea that better petroleum product should fetch better price. "If the Government accepts the proposal by the domestic refiners, then Euro III compliant petrol and diesel should fetch better price as the refiners had to make additional investments for them," the sources said.

There is also a strong possibility of Government selectively allowing exports of Euro III grade oil products, which fetch additional margins in the international market, a senior ONGC official said.

Sources told Business Line that for superior technology, the energy efficiency gives MRPL an additional cost advantage of 5 to 10 per cent.

"In the medium-term, MRPL expects to have better access to light-sweet variety crude of Bombay High of ONGC. This will not only provide improve quality of refined products, but also give further boost to the company's margins," ONGC sources observed.

The proposed increase in refining capacity and expansion plans in propane and methane would provide greater clout for MRPL in refining and strength in pretro-chemicals in the long run, a fund manager added.

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