RIL's volatile GRM a concern; accumulate on dips: HDFC Sec

Aishwarya Deepak, Analyst - Oil & Gas, HDFC Securities believes that although from  a long term perspective things are in favour refinery major Reliance Industries, in the intrim period- (from now to 2015) volatility in gross refining margins could be a concern. He however advises long term investors to accumulate the stock on every fall.

Reliance Industries today reported a gross refining margin of USD 8.4 per barrel for the April-June quarter as compared to USD 7.6 in same quarter last year.

Below is the verbatim transcript of the interview

Q: What is your call on the stock now? First of all these numbers do they surprise you or do you think they are inline with your estimates?

A: The numbers are almost inline with estimates. Their project type as well as the recent gas price hike, coke re-gasification and improvement in the gas volume etc are likely to benefit the company by 2016, all these things are synchronising in 2016-2017.

If you look at from the longer-term perspective you will find that things are going in favour of Reliance Industries, but if you see the interim period from here to maybe till 2015 gross refining margin volatility is something where I am a bit worried. If you look at the Reliance earnings, 50 percent of the earnings comes from the refining business alone. So, considering the long gestation period of the project I would suggest to accumulate this stock whenever it falls. I guess that will be the right time to accumulate for the long-term investors.