RIL falls as Q4 profit disappoints; analysts stay positive

The oil explorer and refiner reported a net profit of Rs 5,376 crore, up 14% year-on-year, but below analysts’ expectation of Rs 5,500 crore, according to a CNBC-TV18 poll. RIL’s net sales for the three-month period were up 26.2% on year to Rs 72,674 crore. Analysts had estimated net sales of Rs 68,500 crore.

The company’s gross refining margins also missed analysts expectations of around USD 10 a barrel. RIL's fourth quarter GRM's were at USD 9.2 a barrel in the fourth quarter, compared with USD 9 in the third quarter.

Enam Securities said RIL’s margins were subdued due to the planned shutdown of its fluidized catalytic cracking unit. The brokerage expects margins to significantly improve going ahead.

“On the back of refinery closures in Japan, middle east and north Africa, and strong demand growth especially for transportation fuels, refining margins are expected to remain strong,” it said.

JP Morgan said RIL would stand to benefit with all its units now operational.

“RIL is positioned to benefit from strong auto fuel spreads, continued strength in polyester chain and bottoming of polymer cycle in 2011,” it said.

RIL last week indicated that ethylene margins – currently weak due to over-capacity globally – are expected to bottom out in 2011.

“Along with strong polyester and chemical margins, recovery in polymer spreads could lead to a petrochemical super-cycle by 2014-15,” Enam said.

Enam maintained a “buy” rating on Reliance Industries with a target price of Rs 1,155 a share.

As of Thursday’s close, RIL shares have fallen 1.7% since the beginning of 2011, compared with an over 2% fall in NSE’s CNX Energy Index and a 4% decline in the broader NSE Nifty index.