Mangalore Refinery & Petrochemicals Ltd. Upgraded to Hold on Technical and Financial Improvements

Technical Trends Shift to Mildly Bullish

The most immediate catalyst for MRPL’s rating upgrade is the positive shift in its technical grade. The stock’s technical trend has moved from a sideways pattern to a mildly bullish stance, signalling a potential upturn in market sentiment. Key technical indicators present a mixed but improving picture. On a weekly basis, the Moving Average Convergence Divergence (MACD) remains mildly bearish, while the monthly MACD also shows mild bearishness, suggesting some caution among longer-term investors.

However, the Relative Strength Index (RSI) on both weekly and monthly charts shows no clear signal, indicating a neutral momentum. Bollinger Bands reveal a mildly bullish trend on the weekly chart, though the monthly view remains bearish. Daily moving averages have turned mildly bullish, supporting short-term positive momentum. The Know Sure Thing (KST) indicator is bullish on the weekly timeframe but bearish monthly, reflecting a divergence between short- and long-term momentum.

Volume-based indicators such as On-Balance Volume (OBV) show no trend weekly but a bullish signal monthly, hinting at accumulation over the longer term. Dow Theory analysis finds no definitive trend on either timeframe. Overall, the technical picture suggests cautious optimism, with short-term indicators improving enough to justify a rating upgrade but tempered by some lingering bearishness on longer-term charts.

Valuation Remains Attractive Despite Sector Volatility

MRPL’s valuation metrics underpin the Hold rating, with the stock trading at a discount relative to its peers’ historical averages. The company’s Return on Capital Employed (ROCE) stands at a respectable 10.4%, signalling efficient use of capital in generating profits. Its Enterprise Value to Capital Employed ratio is a modest 1.6, indicating the stock is reasonably priced given its asset base and earnings potential.

Despite a high debt profile, with an average Debt to Equity ratio of 2.41 times, MRPL’s valuation remains attractive due to its improving profitability and cash position. The Price/Earnings to Growth (PEG) ratio of 1.9 suggests the stock is fairly valued relative to its earnings growth prospects. Over the past year, the stock’s price has been largely flat, generating a return of just 0.07%, but underlying profits have risen by 13.6%, highlighting a disconnect that could offer upside potential if market sentiment improves.

Financial Trend Shows Healthy Growth and Strong Profitability

MRPL’s financial performance in the second quarter of FY25-26 has been a key factor supporting the upgrade. The company reported net sales growth at an annualised rate of 17.62%, while operating profit expanded even faster at 21.68%. This robust growth trajectory is complemented by the highest quarterly PBDIT recorded at ₹1,488.60 crore, underscoring operational efficiency improvements.

Cash and cash equivalents have surged to a record ₹8,742.50 crore in the half-year period, providing a strong liquidity buffer despite the company’s high leverage. The operating profit to interest ratio stands at a healthy 6.79 times, indicating comfortable coverage of interest expenses and reduced financial risk. These metrics collectively point to a company that is strengthening its financial foundation while managing debt prudently.

Quality Assessment: Balancing Strengths and Risks

While MRPL’s quality parameters have improved, the company remains a high-debt entity, which tempers the overall assessment. The average Debt to Equity ratio of 2.41 times is significant, reflecting reliance on borrowed funds to finance operations and expansion. However, the strong cash position and operating profit coverage mitigate some concerns related to solvency and interest burden.

The company’s promoter holding remains majority, which often provides stability and alignment of interests with shareholders. MRPL’s long-term growth prospects are supported by its position in the oil refining sector, which continues to benefit from steady demand and strategic importance in India’s energy landscape. The stock’s 52-week price range between ₹98.95 and ₹185.00 shows considerable volatility, but the current price near ₹149.35 suggests a midpoint valuation with room for upside if fundamentals continue to improve.

Comparative Performance and Market Context

MRPL’s stock returns have outpaced the Sensex over longer periods, with a three-year return of 165.75% compared to the Sensex’s 41.57%, and a five-year return of 278.10% versus 76.39% for the benchmark. However, in the short term, the stock has underperformed, with a one-month return of -2.80% against the Sensex’s -0.32%, and a year-to-date return of -1.87% compared to the Sensex’s 0.26%. This divergence highlights the stock’s sensitivity to sector-specific factors and technical fluctuations.

Today, MRPL’s share price declined by 1.32% to ₹149.35, with intraday highs and lows of ₹156.20 and ₹148.50 respectively. The stock’s technical indicators suggest a cautious but improving outlook, which aligns with the Hold rating reflecting neither a strong buy nor a sell stance.

Outlook and Investment Considerations

MRPL’s upgrade to a Hold rating by MarketsMOJO reflects a balanced view of its current position. The company’s improving technical indicators, solid financial growth, and attractive valuation metrics provide a foundation for cautious optimism. However, the high debt levels and mixed signals from some longer-term technical indicators suggest investors should remain vigilant.

For investors, MRPL offers a compelling case as a turnaround candidate with strong operational cash flows and improving profitability. The stock’s long-term outperformance relative to the Sensex underscores its potential as a core holding in the oil refining sector. Yet, the recent price volatility and sector headwinds warrant a measured approach, consistent with the Hold recommendation.

In summary, MRPL’s rating upgrade is justified by a confluence of factors: a shift to mildly bullish technical trends, attractive valuation relative to peers, robust financial performance with record quarterly profits and cash reserves, and a quality profile that balances growth with manageable risks. This nuanced assessment positions MRPL as a stock to watch closely as it navigates the evolving energy landscape in 2026 and beyond.

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