Buy Reliance Industries; target of Rs 1017: Angel Broking

Angel Broking's report on Reliance Industries (RIL)

"RIL's 3QFY2014 net sales increased by 10.3 percent yoy to Rs 103,521cr (below our estimate of Rs 117,488cr) mainly led by higher Refining segment sales (+10.1 percent yoy to Rs 95,432) and Petrochemicals segment sales (+14.6 percent yoy to Rs 25,280cr). RIL's KG-D6 gas production fell to 12mmscmd compared to 24mmscmd in 3QFY2013. However, the company stated that it has started production from MA 8 field in January 2014, which is expected to add ~2.5mmscmd of gas production from FY2015. EBITDA falls 9.0 percent yoy: RIL's EBITDA fell 9.0 percent yoy to Rs 7,622cr, on account of lower profits from the Refining and Oil & Gas segments. The Refining segment's EBIT declined by 8.5 percent yoy to Rs 3,141cr due to lower GRMs and lower throughput. The GRM stood at USD 7.6/bbl in 3QFY2014 compared to USD 9.6/bbl in 3QFY2013."

"During the quarter, the depreciation (including depletion) expense declined by 12.8 percent yoy to Rs 2,143cr while the other income increased by 32.5 percent yoy. Hence, the company's PAT was flat yoy at Rs 5,511cr (broadly in-line with our estimate of Rs 5,508cr)."

"During the quarter, the depreciation (including depletion) expense declined by 12.8 percent yoy to Rs 2,143cr while the other income increased by 32.5 percent yoy. Hence, the company's PAT was flat yoy at Rs 5,511cr (broadly in-line with our estimate of Rs 5,508cr). Outlook and valuation: For 3QFY2014, RIL's Petrochemicals segment's profit reported improvement; however, its Oil & Gas segment's profitability continued to decline due to decline in production from its KG D6 block. Looking ahead, we expect production from the KG D6 block to increase gradually from FY2015. Moreover, higher gas prices and the recent improvement in GRMs are likely to drive its earnings growth in FY2015. Hence, we recommend a Buy rating on the stock with a target price of Rs 1017," says Angel Broking research report.

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