Anish Jhaveri’s Prediction For MRPL Comes True – 3 Years Later

Anish Jhaveri of Antique Stock Broking is a very savvy investor with a number of winning stocks to his credit. On 29th March 2011, he exhorted investors to buy truck loads of MRPL stock on the premise that its impending refinery expansion would transform it into a powerhouse. “MRPL is a forgotten story but it has to be brought under the radar” and “you have to climb the bus early” Anish Jhaveri had said, with great enthusiasm in his voice.

While Anish Jhaveri’s analysis cannot be faulted, MRPL’s ambitious expansion project got hugely delayed and the cost-overruns led to horrendous losses and sent its’ stock price into a tailspin.

In hindsight, there was probably good reason why the market had treated MRPL as a “neglected” stock.

Anyway, Anish Jhaveri’s analysis did finally prove right today when MRPL reported excellent Q4FY14 results with a profit of Rs. 1067 crore as against a loss of Rs. 62 in the corresponding quarter of the last fiscal.

This sent the stock price surging 19% intraday though it settled 10% up at close. In the last 3 months, the stock has given an incredible return of 88% and a number of savvy investors who timed their purchase right have made a lot of money.

PP Upadhya, MD of MRPL, pointed out that the phase-III expansion project was coming to an end with the coker commissioning in April. He added that in the first half of FY15, the margins were expected to go up at least by USD 2.

He, however, also added that the bottom-line had been boosted by foreign exchange gains of Rs. 500 crore on account of the strength of the rupee. He pointed out that the price of crude and the currency fluctuation remained the biggest risk for MRPL.

Speaking about the future prospects of MRPL, Motilal Oswal has issued a research report in which it is not very gung-ho. The research report points out that because MRPL is a standalone refiner, it is highly sensitive to GRM. A variation of USD1/bbl in GRM results in a 25% change in the FY14 EPS the report says. There are other reasons given on why one should be “neutral” about the stock.

Surprisingly, nobody seems to have thought of the big non-quantifiable problem, namely, the thinking of the Mandarins in North Block. If the Mandarins realize that MRPL is making bumper profits while its customers (the OMCs) are bleeding, the Mandarins could ask MRPL to pay a “subsidy” to the OMCs, in the same way that ONGC, MRPL’s parent, is presently doing. In the December Quarter, the Govt. directed ONGC to pay a record Rs. 13,764 crore as subsidy to the OMCs.

This risk cannot be factored in terms of money but it is not something that can be ignored either.

So, my own thinking is that from a medium to long-term perspective, it is not worth an investor’s while to remain invested in MRPL when there are so many other attractive stocks competing for his money.