Mangalore Refinery & Petroleum , a subsidiary of Oil and Natural Gas Corporation Limited, has reported a net loss of Rs 272.00 crores for the first quarter. The company's performance was primarily impacted by a planned plant turnaround and inventory losses resulting from crude price volatility.

Financial Performance

MRPL's revenue for Q1 stood at Rs 20,983.00 crores, reflecting a decrease from the previous year. The company's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) was reported at Rs 218.00 crores. The Gross Refining Margin (GRM) averaged at $3.88 per barrel, down from $4.70 per barrel in Q1 of the previous year.

Operational Highlights

During the quarter, MRPL processed 3.52 million metric tonnes (MMT) of crude and other feedstocks. This volume was lower compared to the previous year, primarily due to the planned plant turnaround. However, the company achieved a record processing of 1.51 MMT in April alone, showcasing the refinery's inherent capacity when all units are operational.

The distillate yield for the quarter was 80.97%, consistent with previous quarters. The company reported a fuel and loss of 11.41%, although the adjusted figure, accounting for the turnaround, was around 10.1%.

Market Context and Future Outlook

Global refining margins showed improvement during the quarter due to supply disruptions and normal demand growth. Refinery closures expected in 2025-26 are anticipated to support crack spreads going forward. However, crude price fluctuations impacted the bottom line in the last quarter.

In the domestic market, diesel demand grew by approximately 2% year-on-year, while gasoline demand remained resilient with around 7% growth. These trends support MRPL's marketing focus in the southern and western parts of the country.

Retail Expansion and Performance

MRPL currently operates 170 retail outlets and plans to add approximately 100 more during the current financial year. The company's retail sales volume for the quarter was 68,000 KL, contributing about Rs 60.00 crores to the margin. MRPL aims to increase its retail sales volume from 230,000 KL in the previous financial year to 300,000-325,000 KL in the current year.

Debt Position and Capital Expenditure

As of the end of Q1, MRPL's gross debt stands at Rs 13,608.00 crores, with a net worth of Rs 12,657.00 crores, resulting in a debt-equity ratio of 1.08x. The company expects this ratio to improve as earnings rebound in the coming quarters.

Capital expenditure for Q1 was Rs 537.00 crores, primarily due to shutdown expenses. The total annual CapEx is expected to be around Rs 1,000.00 crores, including the shutdown expenses already incurred.

Future Prospects

With all units now back in service, MRPL expects the throughput in Q2 to be above 4.3 MMT, with GRMs already showing stronger performance in July. The company is targeting GRMs in the high single-digit range for Q2, supported by stronger middle distillate cracks and internal fuel loss reduction initiatives.

MRPL remains committed to prudent capital allocation, disciplined cost management, and value-accretive growth as it navigates the challenges and opportunities in the refining sector.

Petrochemical Operations

The company's polypropylene plant is operating at 100% capacity, with margins benefiting from direct crude-to-polypropylene production. The aromatic complex is currently running in reformate mode, contributing about $0.50 per barrel to the overall margins.

As the refining industry faces evolving market conditions and regulatory changes, MRPL continues to focus on operational efficiency and strategic growth initiatives to enhance its competitive position in the market.

Mangalore Refinery & Petroleum (MRPL) shares experienced a significant boost, climbing 6.4% to reach Rs 154.00. This surge extends the company's two-day rally to an impressive 10.6%, reflecting improved investor sentiment in the refinery sector.

YES Securities Maintains 'Buy' Rating

YES Securities has reaffirmed its 'buy' rating on MRPL stock, demonstrating confidence in the company's future prospects. In a notable move, the brokerage has raised its price target for MRPL from Rs 160.00 to Rs 180.00. This new target values the stock at 1.9 times the estimated FY27 price-to-book value, indicating potential for further growth.

Q1FY26 Financial Performance

Despite the positive market reaction, MRPL's recent financial results paint a challenging picture:

The company reported a consolidated net loss of Rs 271.97 crore for Q1FY26, a significant reversal from the Rs 73.22 crore profit recorded in the same period last year. Revenue also saw a substantial decline, dropping to Rs 20,988.03 crore from Rs 27,289.40 crore year-on-year.

Factors Affecting Performance

Several factors contributed to MRPL's weak quarterly performance:

1. A 45-day Phase-II shutdown, extended due to severe rainfall
2. Lower plant utilization
3. Limited feedstock availability

These challenges resulted in a gross refining margin of $3.88 per barrel, falling below YES Securities' forecast of $7.30 and the previous quarter's $6.23.

Outlook and Growth Drivers

Despite the recent setbacks, YES Securities anticipates a better performance in Q2, citing:

• Improved refining spreads
• Elevated diesel cracks
• Geopolitical risk premiums

A key advantage for MRPL is its ability to source over a third of its crude from Russia at discounted rates, potentially boosting profitability.

Long-term Growth Prospects

MRPL's long-term growth strategy focuses on:

1. Petrochemicals expansion
2. Retail business development

The company's current financial position shows a net debt-to-equity ratio of 0.99x, indicating a balanced capital structure.

As MRPL navigates through short-term challenges, the market appears optimistic about its future prospects, reflected in the recent share price rally and the upgraded price target from YES Securities.