Accumulate Reliance Industries; target of Rs 800: KRChoksey

KRChoksey is bullish on Reliance Industries and has recommended accumulate rating on the stock with a target of Rs 800 in its July 23, 2012 research report.

“Reliance Industries Ltd (RIL) reported net Profit of Rs 4473cr, slightly above our expectation (Rs 4366 cr). Net profit declined by 21% y-o-y, mainly due to the company not being able to arrest falling gas production from KG-D6, reduction in deltas across olefins and polyester chain. Net sales improved by 13% to Rs 91,875 cr on Y-o-Y largely due to higher prices of products while increase in volume accounted only 4%. Other income was higher at Rs1,904cr as against Rs 1078cr on a y-o-y basis primarily due to higher average liquid investments.”

“36% Dip in revenue on Y-o-Y basis and ~4 on Q-o-Q basis to Rs 2508cr mainly due to fall in production to the level of 32.5 mmscmd (AvgQ1FY13) and natural decline continue in PMT field. 8% fall in rupee against $ helped this segment to improve EBIT margins by ~200bps on Q-o-Q. In order to ramp-up production over the next three to four years ( to double gas production from current level of 30mmscmd), RIL is focusing on KG D6, NEC-25, Panna-Mukta-Tapti and coal bed methane blocks. With an aim to augment production from KG D6, RIL plans to submit a revised field development plan (FDP) for D1/D3 fields in Q2FY13 and a FDP for all satellite fields in Q3FY13 once the engineering surveys are over. RIL also plans to recommence exploration activities from Q2FY13. However, RIL needs government approvals in order to implement its plans. RIL provided positive commentary on E&P portfolio and BP’s technical expertise is expected to help arrest decline in gas production and eventually increase from current levels.”

“We believe that refining margin is improving but still relatively low, we expect pickup in regional margins in 2HFY13. Any gradual recovery in downstream demand and improvement in global operating rates would be positive trigger for petchem and we are more positive on upstream (pick up in shale gas). We recommend Accumulate on RIL with price objective of Rs 800/share,” says KRChoksey research report.  

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