Accumulate Reliance Industries; target of Rs 800: KRChoksey

“Reliance Industries, total buyback of 2.79 cr shares amounting to Rs 1929 cr which is ~22% of the decided buy back. It will improve FY13 EPS by 1.4%. Petchem production to touch 25MMTPA, 66% growth in existing capacity in next 3 to 4 years. These include setting up gas cracker unit, PTA plant of 4.3mmtpa, polyester plant 1.5mmtpa and paraxylene plant of 1.8mmtpa capacity. Installation of Petcoke gasification unit into SEZ refinery with total investment of $4bn would be commissioned by FY15. The unit would improve GRM by $3.5/bbl as cost of synthetic gas produced ($5/mmbtu) would be much cheaper than imported LNG ($12/mmbtu).”

“Gas is expected to flow by FY15 at the rate of 3 to 4 mmscmd, subject to government approvals. Reliance Industries hopes to produce an additional 30 mmscmd of gas at its KG D6 field off India's East coast, the additional production will be realized through further exploration and development at the fields. RIL, along with BP has suggested the government for the integrated field development plan to reduce costs and increase gas production. The company hopes to submit integrated FDP by Dec-12, and hopes to bring the whole field into production in next three years. RIL has invested in 3 oil and gas assets in the US shale gas space, with an investment commitment of over $3.5bn. The three assets combined with a resource potential of 10 tcf. Current gross production exit rate of 8 mmscmd of gas and 34k bpd of condensate, the company expects to increase production 10fold.”

“We believe in improvement of GRM; expect pickup in regional margins in 2H CY12. Any gradual recovery in downstream demand and improvement in global operating rates would be a positive trigger for petchem. We recommend Accumulate on RIL with price objective of Rs 800/share,” says KRChoksey research report. 

Public holding more than 90% in Indian cos

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