Chennai Petro, MRPL shares rise up to 11% as YES Securities sees valuation re-rating

Mumbai, June 23, 2025 — Shares of Chennai Petroleum Corporation Ltd (CPCL) and Mangalore Refinery and Petrochemicals Ltd (MRPL) surged sharply on Monday, rising up to 11% intraday, after brokerage firm YES Securities flagged both companies as strong valuation re-rating candidates in the current refining cycle. The bullish sentiment comes as investors increasingly look toward oil refining stocks on the back of robust gross refining margins (GRMs) and improving financial fundamentals.

Stock Movement: CPCL and MRPL See Strong Buying Interest

CPCL stock rose as much as 10.7% to an intraday high of ₹585 on the NSE, while MRPL jumped 10.2% to ₹191. Both stocks closed the day with gains of over 9%, significantly outperforming the Nifty 50, which ended marginally in the red.

Market participants attributed the rally to a recent research note by YES Securities, which revised the earnings outlook for state-run refiners and projected a valuation reset driven by higher refining margins, inventory gains, and potential deleveraging.

YES Securities: Refining Cycle Driving Re-Rating Potential

According to YES Securities, both CPCL and MRPL are entering a “sweet spot” amid favorable industry tailwinds. The brokerage highlighted:

“We believe CPCL and MRPL are undervalued considering the strengthening of GRMs, deleveraging progress, and strong operational performance. As oil product cracks improve and net debt reduces, a valuation re-rating is imminent.”

The firm assigned a ‘Buy’ rating on both stocks, with a price target of ₹650 for CPCL and ₹210 for MRPL, implying further upside potential of 10–15% from current levels.

Sector Dynamics: GRMs and Inventory Gains Lift Sentiment

The refining sector has been witnessing a cyclical upswing since the last quarter, supported by:

• Elevated GRMs on middle distillates like diesel and jet fuel.

• Lower crude prices, widening the crack spreads.

• Inventory gains, given the volatility in crude oil over the past few months.

Analysts suggest that public sector refiners, traditionally trailing their private peers in valuation, are now catching up as their balance sheets improve and operating efficiencies rise.

“MRPL and CPCL are classic deep-value bets in a sector that’s benefiting from a global refining recovery. Investors are now recognizing this,” said Rajeev Arora, energy sector analyst at Narnolia Financial Services.

Financial Snapshot: Improving Metrics Strengthen Case

MRPL posted a net profit of ₹870 crore for Q4 FY25, reversing a loss of ₹190 crore in the year-ago period. GRMs stood at $13.6 per barrel, aided by strong export realizations.

CPCL, too, reported a 75% YoY jump in net profit at ₹1,040 crore, with GRMs touching $12.4 per barrel and total debt reducing by over 20% during the fiscal.

“Both refiners have significantly improved their operating leverage. The debt-to-equity ratio is falling, and earnings visibility has improved,” noted Kavita Mehra, oil & gas expert at Emkay Global.

Valuation Gap: PSUs vs Private Refiners

Despite recent gains, CPCL and MRPL continue to trade at lower price-to-earnings (P/E) and price-to-book (P/B) multiples compared to peers like Reliance Industries and Nayara Energy.

MRPL’s current P/E stands at 6.3x, while CPCL trades at 5.8x, according to Bloomberg data. In comparison, private refiners command double-digit P/E multiples, reflecting the valuation discount that PSUs have traditionally suffered due to policy overhang and volatility in earnings.

Analysts believe this gap is narrowing as CPCL and MRPL deliver consistently on operational performance and strengthen their balance sheets.

Investor Outlook: Risk and Opportunity

While YES Securities’ bullish call has energized investor sentiment, experts also caution against overexuberance, noting the cyclical nature of refining.

“GRMs are volatile, and any shift in global crude dynamics could impact margins. However, for investors with a 12–18 month horizon, CPCL and MRPL offer attractive risk-reward,” said Deepak Agarwal, portfolio strategist at HDFC Securities.

Retail interest in both stocks has also increased, with trading volumes more than doubling compared to the 30-day average. Market watchers advise investors to track crude prices, GRM trends, and policy cues closely in the coming quarters.

The rally in Chennai Petro and MRPL shares reflects not just a technical breakout but growing institutional confidence in PSU refiners' earnings and valuation potential. With analysts upgrading earnings estimates and highlighting strong fundamentals, both stocks appear poised for further re-rating — albeit with the usual caveats of sector cyclicality.

Investors looking for exposure to India's refining story may find CPCL and MRPL to be timely opportunities amid favorable macro conditions and improving micro fundamentals.