Shares of Mangalore Refinery and Petrochemicals Ltd (MRPL) soared by approximately 6.4% on Wednesday, hitting Rs 154 on the BSE, extending its two-day rally to over 10%. The jump comes as investor sentiment improves, buoyed by expectations of better Q2 earnings amid an improved refining environment. YES, Securities reaffirmed its “Buy” recommendation, boosting its target price from Rs 160 to Rs 180, attributing the shift to recovering gross refining margins (GRMs).The results of the first quarter (Q1) of MRPL recorded a net loss of ₹ 272 crore, mainly due to shut down and heavy rainfall of Phase-2 lasted for 45 days, which led to a hindrance in production and affected profits. The gross refining margin (GRM) declined to just US $ 3.88 per barrel, lower than an estimate of ₹ 7.30 per barrel of YES Securities. The reason for this was the reduction in inventory loss and exports.

However, the outlook of the first half (H1FY26) of the second quarter (Q2) and the financial year 2025-26 looks a bit promising. YES Securities says the crack margin of diesel still remains strong and crude oil prices remain high due to the ongoing geopolitical stresses between Israel-Iran, which can help to keep the GRMs stable. In addition, more than one-third of crude oils are available from Russia at concessional rates, making it capable of maintaining the most competitive refining spreads in India's single-place refineries.

Looking beyond the near term, YES Securities expects MRPL’s focus on petrochemicals, fuel retailing, and pipeline infrastructure to enhance long-term earnings quality. While a merger with HPCL remains unlikely before FY27, the company aims to keep debt levels stable despite rising capital expenditure.