Ventura is bullish on Reliance Industries and has recommended buy rating on the stock in its January 23, 2013 research report.
“Reliance Industries, with the government all set to accept the recommendations of the Rangarajan committee on linking natural gas prices to international rates, the stage is set for the comeback of the E&P business of RIL. In addition the strong performance of the petchem business and stable refining margins portend well for the stock, Additionally with RIL undertaking a Rs 100,000 crore capex in its main businesses augurs well for the long term growth of the company. We expect RIL to post strong performance ahead led by the huge investments in core as well as noncore sectors. At the CMP of Rs 923, RIL trades at a PE multiple of 13.4x and 11.9x FY14E & FY15E and we recommend a long term buy on the stock.”
“For Q3FY13, Reliance Industries registered a 2.3% qoq and 23.9% yoy growth in net profit to Rs 5502 crore driven largely by higher refining EBIT and other income. The net sales too met expectations and grew by 10.3% yoy to Rs 93,886 crore, primarily led by the higher volumes and rupee depreciation. Performance of Refining & Marketing business improved sequentially led by higher throughput and 3.3% qoq jump in GRMs which stood at $9.6/bbl v/s $ 9.5/bbl in the previous quarter. Performance of the E&P business is easing backed by the recently received approvals. The company has reported GRMs at $9.6/bbl in Q3FY13 as against $6.8/bbl in Q3FY12 and $9.5/bbl in Q2FY13. The key trigger to drive this growth is better gasoline and naphtha crack spread. Weak fuel oil spreads had caused material fall in Singapore GRMs. Nonetheless, RIL having significantly lower proportion of Fuel Oil in its product slate was less impacted. The pet coke gasification plant is on track and would take 3 years to come on stream. Despite volume being flat in Q3FY13, petrochemical segment revenues rose by 11.5% yoy and realizations were higher by 11% yoy as prices for most products have increased in line with rising crude oil prices and steep rupee depreciation. On a sequential basis, volumes were marginally low and realizations remained flat. EBIT margins for the segment de-grew by 212bps on a YoY (+90bps QoQ). The sequential increase was owing to improvement in PP, PX and MEG spreads. Overall polyester chain also saw improvement on a sequential basis. The demand growth for all products remained strong across the categories in India.”
“The E&P business has seen reversal in news flow over the last few months, with a slew of approvals coming through for RIL’s development plans and budgets for D6. Over the last few months, the company has received approvals for appraisal of CY-D6, drilling of KG-D6 development well G2 (OFDP), work program budget for KG-D6. However, KG-D6 gas production continued to decline (-41% yoy,-16% qoq) in Q3 FY13. Gas production at the Panna-Mukta field was higher by 2.8% yoy, whereas oil production was down by 16% yoy in Q3FY13. Gas production at the Tapti field also declined by 40% yoy over the same quarter. Lower volumes 32.2% yoy and 14.8% qoq, translated into a slump in revenues. EBIT margins for the segment plunged by 15% yoy and 7.7% qoq to 30.7% owing to operational de-leverage. Going ahead, the company has planned to arrest the decline in production but awaits key approvals from the government including budget approvals for capital expenditure. US Shale gas business registered volumes of 32.3 bcf backed by ramp up in production at the Pioneer and Carizzo JV. The pricing too recovered from multi year lows on the backed of supported demand and decline in storage surplus.”
“EBITDA Margins for the quarter rose to 30bps yoy to 8.9% on the back of favorable refining and Petchem number offsetting weakness from E&P businesses. Other income for the quarter grew by 1% yoy to Rs 1,740 crore led by higher cash+ investments on hand (Rs800bn at end of Q2FY13),” says Ventura research report.
Non-Institutions holding more than 90% in Indian cos
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