Going ahead what is expected of RIL?

Moneycontrol Bureau
Reliance Industries (RIL) posted a second consecutive drop in its quarterly net profits due to a decline in refining margins and consistent fall in KG-D6 output. However, the results which were declared last Friday were in-line with street estimates with a definite surprise on the gross refining margins (GRM) front. While brokerages had estimated GRM to be below USD$7 per barrel, the company posted a GRM of $7.6 per barrel.

Meanwhile, RIL is trading higher by 1.22% to Rs 740.40, after opening 1% lower at Rs 724.

Going ahead, this is what brokerages expect of RIL's E&P, refining and petchem businesses.

Exploration and production segment
Brokerages expect KG-D6 gas output to be anything between 25-30 million standard cubic feet per day (mmscmd) Analysts are also unsure of an increase in gas price for KG-D6 block from its current levels of $4.2 per mmbtu (million metric British thermal units) as it is fixed by an EGoM (Empowered Group of Ministers) for a period of five years. Any out-of-turn increase will invite additional  public scrutiny, especially in light of alleged inflated capex and lower-ten-approved gas production.

Petchem margins
Analyst expect petchem margins to be subdued in FY13. However, it might improve subsequently if global operating rates improve along with recovery in downstream demand.

Refining margins
Refining margins will improve modestly over the next 6-9 months from current levels led by limited supply additional globally.

This is what brokerages have to say
Kotak Institutional Securities
We do not expect meaningful improvement in RIL’s key businesses over the next 9-12 months and hence, retain our ‘reduce’ rating on the stock with a target price of Rs 770.

UBS
After pricing in negatives like weak GRMs, petchem spreads and declining KGD6 output, the firm has assigned a ‘buy’ rating on the stock with a target price of Rs 930.

Goldman Sachs says its expects an upswing in refining margins and E&P turnaround. Hence, it has assigned a ‘buy’ rating on the stock with a target price of Rs 734.80