Buy Reliance Industries, target of Rs 2936: India Infoline

India Infoline has maintained its buy rating on Reliance Industries with a target price of Rs 2936 in its July 25, 2008 research report. "Reliance Industries Ltd (RIL) net sales were up by 40.8% driven by higher realizations across the segments. GRMs were at USD 15.7 per barrel for Q1 FY09, tad below expectations. OPM were down 450bps to 14.7% as EBIT margins for both refining and petchem businesses declined. Two additional discoveries were made in Q1 FY09. Commencement of production at KGD6 and RPL refinery in H2 FY09 and additional E&P discoveries to drive future growth."

"We maintain our BUY call on the stock with a sum of parts target of Rs 2936 providing an upside of 27.3%. Although petrochemical segment is likely to witness margin pressures in the near term, the integrated nature of the segment will help RIL post a relative strong performance in the downtrend. Refining segment might witness pressure on GRMs in the near term but will sustain over long term averages. With RPL slated to commence operations before the scheduled date of December 2008, contribution from refining segment will increase considerably. KG D6 is all set to commence production from 2H FY09. This will provide further trigger to earnings growth. On the other hand, pending decision on RIL-RNRL case and issue of windfall tax would remain overhangs in the near term," says India Infoline's research report.

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