Refining Companies Buzzed In Trade Today; Higher Refining Margin To Aid Strong Q1Fy23

Indian indices in trade on April 18, 2022 spooked due to a host of global headwinds with Nifty ending below 17,200 mark. Nevertheless several stocks in a weak market, hit their lifetime highs.

Accordingly there is one set of pack that was buzzing in trade today i.e. the petrochemicals space. The main reason for the cheer in the space has been the supply cruch shortage that has resulted in crack spreads. The crack spreads are typically the spreads in case of products that move northwards and hence the Singapore gross refining margin has hit a 4-year high and accordingly this is positive for the refining companies.

So, companies that do not have the marketing segment like MRPL and Chennai Petro tend to benefit.

Shares of MRPL have gained 23% YTD while in trade today were up by a tad and settled higher at Rs. 52.9 per share, likewise, Chennai Petro ended the day higher by 3.77% at Rs. 181.5, while it hit the day's high price of Rs. 184.2 per share. On a YTD basis, Chennai Petro gained 77%.

As there is a view that the ongoing Ukraine Russia conflict shall not settle soon and this as per the IEA shall reduce refining throughput by around 1.1 billion barrels of refining capacity per day. So, consequently there will be high refining margin until supply issue abate. Hence not just in Q4 but also Q1 of Fy23 shall be strong for these petro refining companies.