Kotak ups RIL target price on weak rupee, higher gas prices

Moneycontrol Bureau

Broking firm Kotak Institutional Equities Kotak has raised its 12-month forward target price for Reliance Industries to Rs 920 (previously Rs 870), citing weaker rupee assumptions and higher gas prices. 

Kotak has retained its 'add' rating on the stock.

The brokerage expects domestic gas price to increase to USD 9-10/mn BTU by FY2016-18E versus USD 8.4/mn BTU computed for 1QFY15 based on the CCEA-approved formula led by (1) increase in price of long-term LNG imports from RasGas and (2) likely start of higher-priced LNG contract from Gorgon project in 2015.  

"We have increased our fair value of RIL's E&P segment by approximately Rs 25/share to reflect higher domestic gas price in the medium-term versus our earlier assumption of USD 8/mn BTU for KG D-6 and NEC-25 blocks," the brokerage said in a research report.

Kotak also expects RIL to benefit from the recent improvement in global refining and petchem margins.

"We raise our EPS estimates to Rs 68.2 (+3.9 percent) in FY2014E, Rs 72.1 (+5.6 percent) in FY2015E and Rs 72.1 (+5.8 percent) in FY2016E," it says.