Shares of Mangalore Refinery and Petrochemicals Ltd (MRPL) experienced a significant surge, climbing 12.10 percent to reach a high of Rs 182 in Monday's trading session. This impressive performance follows the company's robust second-quarter results for the financial year 2027 (Q2 FY27), which saw substantial growth in revenue and profit.
According to a recent report by Choice Institutional Equities, MRPL's revenue for Q2 FY27 rose by 43.6 percent year-on-year (YoY) to Rs 32,500 crore. The company's adjusted profit after tax (PAT) also saw a dramatic increase, reaching Rs 2,019.5 crore, up from Rs 627.4 crore in the corresponding quarter of the previous year.
Key Drivers Behind MRPL's Performance
The domestic brokerage attributed MRPL's strong financial performance to several factors, including higher product realisations and sustained strength in middle-distillate cracks. The company's EBITDA margin expanded by 351 basis points (bps) YoY to 10.1 percent, supported by inventory gains.
Choice Institutional Equities maintains a 'Buy' rating on the MRPL stock, projecting continued earnings growth. The brokerage anticipates diesel prices to remain elevated throughout FY27, which is expected to bolster earnings for standalone refiners in the second half of the fiscal year.
Positive Outlook on Product Demand and Margins
Analysts at Choice also noted that seasonally higher demand for petroleum products during the October-December period, coupled with relatively softer crude oil demand, could lead to stronger product cracks and an expansion in Gross Refining Margins (GRMs). GRM represents the difference between the total value of petroleum products produced by a refinery and the cost of crude oil.
The brokerage highlighted that elevated product spreads are being supported by tightness in global middle-distillate markets. This tightness is influenced by constrained Russian diesel exports, depleted product inventories in Europe, and reduced refinery throughput globally.
Financial Projections and Target Price
Choice projects MRPL's EBITDA and PAT to increase by 122 percent and 349 percent YoY, respectively, in FY27. Furthermore, the return on equity (RoE) is expected to rise significantly to 47.6 percent in FY27 from 14.2 percent in FY26, while return on capital employed (RoCE) is projected to increase to 42.2 percent from 18.1 percent over the same period.
Following its analysis of the quarterly results, Choice has maintained its target price of Rs 215 per share for MRPL, reaffirming its 'Buy' recommendation. The brokerage revised its FY27 revenue, EBITDA, and PAT estimates upwards by 1 percent, 1 percent, and 5 percent, respectively.
Exceptional Loss Due to Fire Incident
Despite the strong performance, MRPL provisionally recognized an exceptional loss of Rs 118.76 crore in Q2 FY27. This loss stemmed from a fire incident at its Coker Hydrotreater (CHT) unit, encompassing damage to assets, inventory losses, and incidental expenses. The estimated replacement cost for the damaged assets is Rs 225 crore, though the affected assets are adequately insured, with the final loss subject to reassessment.
For the first half of FY27, MRPL reported a net exceptional income of Rs 353 crore, which reflects petroleum product price revisions of Rs 471.76 crore recognized in the previous quarter, partially offset by the fire-related loss.
Broader Market Context
Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, echoed the sentiment that a sustained rise in global crude oil prices, combined with healthy gross refining margins, could continue to support refiners like MRPL and Chennai Petroleum Corporation Ltd (CPCL).