January 24, 2017 / 17:19 IST
The company’s Q3 GRM handily beat our estimates. CPCL reported a GRM of USD6.3/bbl vs USD3.4/bbl in Q2FY17. Core GRM was at USD5.7/bbl vs USD3.6/bbl in Q2FY17 vs benchmark Singapore GRM of USD6.7/bbl. Core GRM were higher despite adverse impact of cyclone Vardah in Dec-16 on the back of higher distillate yield and adjustment of accumulated credits on crude purchase from IOCL (not rated).
Outlook
We upgrade Chennai Petroleum (CPCL) to Buy with a revised PT of Rs404. The company reported a core gross refining margin (GRM) of USD5.7/bbl, but owing to inventory gains, the reported GRM for the quarter was higher at USD6.3/bbl. While the Resid Upgradation Project commissioning can lead to modestly higher GRM from 2HFY18E, we remain conservative and factor-in a modest GRM of USD5.5 to 6/bbl in FY18/19E respectively.
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