Mangalore Refinery earnings beat as stronger refining cracks lift Q2FY27 EBITDA

Investment View and Target Price

In its October 15, 2026 Q2FY27 result update on Mangalore Refinery & Petrochemicals, Prabhudas Lilladher highlighted a strong refining-led EBITDA beat but retained its HOLD rating, as it expects refining margins to normalise. The broker raised its target price to Rs 180 from Rs 165 while maintaining the rating.

Q2FY27 Financial Performance

MRPL reported Q2FY27 EBITDA of Rs 32.8 bn, materially above Prabhudas Lilladher’s estimate of Rs 23.3 bn and the Bloomberg estimate of Rs 30.2 bn. EBITDA rose from Rs 13.2 bn in Q1FY27 and Rs 14.9 bn in Q2FY26, while EBITDA margin expanded to 10.1 per cent from 3.4 per cent in Q1FY27 and 6.6 per cent in Q2FY26. The improvement was driven by lower quarter-on-quarter crude procurement costs, lower other expenses and elevated refining cracks.

Q2FY27 revenue was Rs 325.2 bn, down 15.0 per cent quarter-on-quarter and 17.9 per cent below the broker estimate of Rs 395.9 bn, although it was up 43.6 per cent year-on-year.

Refining Operations and Margins

Refining throughput declined 5.6 per cent both quarter-on-quarter and year-on-year to 4.2 million metric tonnes in Q2FY27 because of planned maintenance shutdowns. Despite lower throughput, implied gross refining margin improved to US$14.8 per barrel from US$8.3 per barrel in Q1FY27 and US$9.1 per barrel in Q2FY26.

Motor spirit cracks averaged US$31.4 per barrel, broadly unchanged from US$31.6 per barrel in Q1FY27 after the special additional excise duty, but well above US$9.5 per barrel in Q2FY26. High-speed diesel cracks increased to US$38.7 per barrel from US$20.4 per barrel in Q1FY27 and US$18.8 per barrel in Q2FY26. Implied crude procurement costs fell to US$96.3 per barrel from US$116.1 per barrel in Q1FY27, though they remained above US$70.8 per barrel in Q2FY26.

Profitability and FY27-FY29 Outlook

Adjusted PAT, excluding the exceptional loss related to the fire incident, was Rs 19.7 bn in Q2FY27, compared with Rs 5.6 bn in Q1FY27. For the first half of FY27, EBITDA grew about 1.7 times year-on-year to Rs 46.0 bn and adjusted PAT rose to Rs 25.3 bn from Rs 3.7 bn in 1HFY26.

Following the strong first-half performance, the broker raised its FY27E GRM assumption to US$11.3 per barrel from US$7.8 per barrel. It expects GRMs to moderate to US$7.4 per barrel in FY28E and US$7.5 per barrel in FY29E as geopolitical disruptions ease and refining cracks revert towards normalised levels.

The estimates assume refining throughput of 17 million metric tonnes in FY27E and 18 million metric tonnes in FY28E and FY29E.

Earnings Estimate Changes and Valuation

Prabhudas Lilladher raised FY28E and FY29E sales estimates by 2.5 per cent and 5.5 per cent respectively. FY28E EBITDA was unchanged at Rs 60 bn, while FY29E EBITDA increased 3.3 per cent to Rs 63 bn.

The target price is based on 6.0 times FY28E EV/EBITDA, producing a core 12-month value of Rs 158 per share. The broker adds Rs 23 per share as option value for the chemicals project.

The chemicals-project valuation assumes 150 kilotonnes per annum of capacity, Rs 175 per kg realisation, a 20 per cent margin and a 15 times multiple. The resulting value is discounted by 50 per cent because commercialisation remains three to four years away.

Key Risks to the Thesis

• Normalisation of refining cracks and easing geopolitical disruption.
• Lower GRMs.
• Maintenance-related throughput disruption.
• The long lead time to commercialisation of the chemicals project.