RIL stock to see positive movement: Experts

Diwan: Atleast one saving grace is that it is not kind of disappointing. I believe the way the stock has moved in the last week or so there was this expectation that things couldn’t kind of be great but at the same time the fact that they are not either would mean that the stock would probably be in a little bit of a positive territory atleast going forward.

Q: A word on the whole oil and gas factor. Do you think that would be a big trigger going forward?

Diwan: It should. More importantly whether this is a sustainable beginning of a trend or just kind of a one off because these kind of high 30's for EBIT margins to come up for business which was struggling all the while means that we are very clearly looking at the largest potential contributor to start getting into a phase where it delivers. If that were to happen it could be exponential and just not linear in terms of growth - the stock could start off seeing forward. The key is we are seeing this quarter on quarter or is this just kind of an aberration this quarter and probably it pans out very differently in the next one. So, the continuity is going to be the key factor in the management commentary.

Q: Does the stock break the range or is it back to Rs 800-900 kind of range for the stock?

Diwan: The petchem business probably this quarter has let you down in terms of margins but globally the kind of capacities that exists and which would kind of mature in terms of efficiency bands, the ideal efficiency band which Reliance is gunning for in the petchem business especially with its product mix would start showing some numbers – very decent growth towards the end of calendar 2014. Till then you would probably see some of these ups and downs and some sort of corrective kind of moves but once the petchem business also matures then you have a straight line growth from there on which is significant. So, I would believe you buy a stock with that in mind and oil and gas also starts chugging along.

Q: What is your word? Oil and gas has come out of nowhere and that is leading to this beat on net profit apart from higher other income. What is your call now after seeing this kind of earnings?

Choksey: I would like to wait for the management commentary to come out before making any comment on the oil and gas part and the margin part. I have briefly gone through it. We have been expecting some amount of volume ramp-up coming up for the oil and gas and at the same time we have been expecting some better performance coming up, but honestly I think the margin upside, we will certainly try and take the call from the management's side as to whether there is some exceptional items out here or there are some sustainable items which could possibly take the margin on a higher side.

Broadly the performance of the company has been in line with expectations. When we spoke we said that the targeted profit which we have put across was Rs 5,492 crore, vis-à-vis that the profit has come at Rs 5,510 crore. So it is broadly in line with our expectation, but I think the oil and gas part is a pleasant surprise.

Q: The point has taken that oil and gas is doing well. The market in any case has high hopes from the business going forward, but petchem quite clearly this quarter is a big disappointment. Last quarter was a one-off - 10 percent margins, but are you negatively surprised by this 8.4 percent number and do you think that somehow offsets what has come from the oil and gas space?

Choksey: Once again it is quite important to know that when the company is progressing ahead with capacity expansion and other programs is it something which the margin would come up in subsequent quarter or not, that is something which we would like to pick up from the management commentary.

More importantly on the petrochemical side I am relatively more bullish than otherwise. I believe that going forward the way in which the feedstock management is going to takeover the current feedstock cost they are likely to increase and margins would increase significantly. So to my mind petchem is going to be money spinner going forward. It may not happen in FY14-15 fully, but maybe in FY15-16 you should see the kind of reflection into the higher margins from petchem side and that could be quite a smart amount of profit jump coming in from petchem, so I am relatively more confident than otherwise.

Q: What is your house call now on the stock? Do you think it is going towards breaking that range anytime soon based on these numbers or would you wait for the next couple of quarters once the gas price hike also kicks in and look for those numbers before taking a call?

Choksey: As of now the house call is accumulate and we will continue to accumulate in the range of Rs 840-860 whenever the market gives opportunity at such levels. However we would like to take a call on this particular stock to upgrade and to buy, probably once we get the commentary in positive about the launch of the 4G business. Already we hear that the retail business has started picking up and it is in a faster growth at this point of time, the results generally get consolidated at the end of the year along with shale gas business. So these two areas would probably give larger amount of confidence to investors, at the same time rerate the stock going forward. So we would probably upgrade it to buy at a later point of time once we know this part very clearly. As of now it is accumulate.