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Management expects GRM(gross rent multiplier) to sustain over the medium term, albeit somewhat volatile.

CPCL’s reported GRM over the last few quarters have been at a discount to the regional benchmark Singapore GRM.

We currently model GRM of US$5/5.6 per barrel in FY12/FY13.

CPCL is currently undertaking various upgradation as well as capacity expansion projects. It has earmarked a total capex of Rs.50b over the next 5 years.

In the near term (in 2HFY12), CPCL is expanding its Manali refinery capacity to 11.1mmtpa through de-bottlenecking.

CPCL is a pure play of refining margins. For every, US$1/bbl change in GRM for FY12, its EPS changes by ~Rs.16.6. The stock trades at an attractive EV/EBITDA of 6.3x FY12E and 5.4x FY13E. We value CPCL at 7x FY12 EBITDA to arrive at a price target of Rs.286/sh. Maintain Buy.