Why MRPL Share Price is Rising

Recently, a red tide has threatened the Indian stock market, the Red Sea issue.

The Red Sea strait is crucial for 30% of global container traffic and 12% of global trade. About 80% of India's merchandise trade with Europe passes through this route.

The Red Sea gained attention due to periodic attacks on commercial vessels by Houthi rebels of Yemen, especially since the outbreak of the Israel-Hamas war in October.

These attacks raised concerns about their impact on global maritime commerce, leading to longer routes and delays in shipments.

Among the sectors affected, Oil Marketing Companies (OMCs) have been notably impacted.

However, amid this downturn, Mangalore Refinery and Petrochemicals Ltd. (MRPL) has demonstrated remarkable resilience, experiencing a significant jump of over 30% in the past month.

Here's why.

#1 Green Aviation Fuel Plans

Mangalore Refinery and Petrochemicals Limited (MRPL), a subsidiary of ONGC, has set the ball rolling for the production of sustainable aviation fuel (SAF) in two years to support the government's one percent blending target.

In December 2023, the company announced that MRPL's management is in the process of obtaining necessary board approvals for the construction of the SAF plant.

Following the approval, the plant is expected to be established in approximately two and a half years, with an estimated cost of around Rs 4.5 bn.

The move to establish the SAF facility is to deal with availability issues as global supplies run significantly short of what's needed by airlines to meet decarbonisation goals.

It may be recalled that in November 2023, the National Biofuels Coordination Committee (NBCC), chaired by Union Petroleum Minister, set the initial indicative blending percentage of Sustainable Aviation Fuel in jet fuel, also known as aviation turbine fuel (ATF) at 1% in 2027 and 2% in 2028.

These targets will initially apply to international flights.

Sustainable Aviation Fuel, or SAF, has a similar chemistry to jet fuel but is a clean substitute for fossil jet fuels.

Unlike jet fuels derived from crude oil, SAF is produced from renewable sources such as agricultural waste, municipal solid waste, and forestry residues.

This means that SAF has the potential to reduce greenhouse gas emissions by up to 80% compared to conventional jet fuel. As such, it is recognised as offering the most immediate and greatest potential to decarbonise aviation over the next 20-30 years.

What Next?

Looking ahead, the government is contemplating the merger of Mangalore Refinery and Petrochemicals Limited (MRPL) with Hindustan Petroleum Corporation Ltd (HPCL), a decision prompted by the Oil and Natural Gas Corporation's (ONGC) acquisition of HPCL five years ago.

This proposed merger has been under consideration for some time, with a committee of experts established in 2022 to assess the integration and synergies of ONGC entities, including MRPL and HPCL.

While the timeline for the merger is yet to be finalised, MRPL has ambitious plans for the future.

The company intends to establish a world-scale Isobutylbenzene production facility, showcasing its commitment to innovation and expansion in the petrochemical sector.

Additionally, MRPL is focused on the development and adoption of cleaner technologies across its operations, aiming to reduce its environmental footprint and meet the rising demand for sustainable fuel options.

In the immediate future, MRPL is set to announce its Q3 results on 22 January 2024.

How Shares of MRPL have Performed Recently

MRPL share price rose around 195% in the past one year. Over a month, the share price has gained by 35%.

MRPL share price touched its 52-week high price of Rs 186 on 15 January 2024. Its 52-week low was Rs 49.3 touched on 28 February 2023.

The company is currently trading at a P/BV (price to book value) multiple of 2.5 times.

About MRPL

Mangalore Refinery and Petrochemicals Limited (MRPL) is a Schedule `A' Miniratna Central Public Sector Enterprise (CPSE) under the Ministry of Petroleum & Natural Gas (MoP&NG) Government of India (GoI).

The company is engaged in the business of refining crude oil.

It is a subsidiary of Oil and Natural Gas Corporation Limited (ONGC), which holds 71.6% of the equity shares.

The company's 15 million metric tonne (MMT) refinery is located north of Mangaluru city in Dakshina Kannada district of Karnataka.

MRPL, with its parent company ONGC, owns and operates ONGC Mangalore Petrochemicals Limited (OMPL), a petrochemical unit capable of producing 1 Million Tonnes of Para Xylene.

For more details, see the MRPL company fact sheet and quarterly results.

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