Shares of Mangalore Refinery and Petrochemicals Ltd (MRPL) surged 12.10 per cent to hit a high of Rs 182 in Monday's trade. Brokerage Choice Institutional Equities, in its recent report, maintained its 'Buy' rating on the stock

In its recent report, Choice said MRPL reported a 43.6 per cent year-on-year (YoY) rise in revenue to Rs 32,500 crore in the second quarter (Q2) of FY27. Adjusted profit after tax (PAT) increased to Rs 2,019.5 crore from Rs 627.4 crore in the corresponding quarter last year.

The domestic brokerage attributed the strong performance to higher product realisations and sustained strength in middle-distillate cracks. Supported by inventory gains, MRPL's EBITDA margin expanded by 351 basis points (bps) YoY to 10.1 per cent.

Why is Choice positive on MRPL?

Choice expects diesel prices to remain elevated through FY27, supporting earnings growth for standalone refiners in the second half of the financial year (H2 FY27).

Seasonally higher petroleum product demand during October-December, along with relatively softer crude oil demand, could support stronger product cracks and an expansion in gross refining margins (GRMs), the brokerage said.

It noted that elevated product spreads were supported by tightness in global middle-distillate markets, including constrained Russian diesel exports, depleted product inventories in Europe and reduced refinery throughput.

The brokerage projects MRPL's EBITDA and PAT to increase by 122 per cent and 349 per cent YoY, respectively, in FY27. It also expects return on equity (RoE) to rise to 47.6 per cent in FY27 from 14.2 per cent in FY26, while return on capital employed (RoCE) is projected to increase to 42.2 per cent from 18.1 per cent over the same period.

Choice has maintained its target price of Rs 215 per share and retained its 'Buy' call. Following the quarterly results, it revised its FY27 revenue, EBITDA and PAT estimates upwards by 1 per cent, 1 per cent and 5 per cent, respectively.

However, the brokerage noted that MRPL provisionally recognised an exceptional loss of Rs 118.76 crore in Q2 FY27 following a fire at its Coker Hydrotreater (CHT) unit.

The loss includes damage to assets, inventory losses and incidental expenses. The estimated replacement cost of the damaged assets is Rs 225 crore. The affected assets are adequately insured, with the final loss subject to reassessment.

For the first half of FY27, MRPL reported net exceptional income of Rs 353 crore, reflecting petroleum product price revisions of Rs 471.76 crore recognised in the previous quarter, partly offset by the fire-related loss.

Last month, Choice Institutional Equities noted that elevated crude oil prices remained a headwind for oil marketing companies (OMCs), while refiners such as MRPL and Chennai Petroleum Corporation Ltd (CPCL) could benefit.

Separately, Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, said a sustained rise in global crude oil prices, coupled with healthy gross refining margins (GRMs), could support refiners such as CPCL and MRPL.

GRM is the difference between the total value of petroleum products coming out of an oil refinery and the price of the raw material, which is crude oil.