Buy Reliance Industries; target of Rs 1168: Emkay

Emkay Global Financial Services research report on Reliance Industries“Reliance Industries, EBITDA for the quarter stood at Rs82.3bn, grew by 9.4% qoq, which was largely due to improvement in petchem margins on the back of strong rebound in polymers, fibre intermediates & aromatics margins. Thereby surging Petchem EBIT up by 27.5% qoq to Rs24bn. While refining GRM came at $8.3/bbl as against $8.7/bbl qoq mainly due to weakness in light and mid distillates cracks. However, improvement in crude differential offsets lower margin. Thereby which refining EBIT remain flat qoq to Rs37.8bn. However, E&P EBIT declined by 31.8% qoq to Rs.3.3bn, on the back of decline in crude oil production from Panna-Mukta from to 2mnbbl to 1.8mnbbl while Tapti field is in the natural state of decline. Also KGD6 production has declined from 13.1mmscmd to 12.5mmscmd in Q2FY15.” “Results were marginally above our and street est. with PAT at Rs57.4bn as against our est. at Rs56bn. While EBIDTA came at Rs82.3bn (as against our estimates of Rs80bn), grew by 9.4% qoq. GRM came at $8.3/bbl vs $8.7/$7.7/bbl qoq/yoy, mainly due to weakness in light and mid distillates cracks. KGD6 volume continued to decline to 12.5mmscmd vs.13.1mmscmd qoq. Petchem EBIT surged by 27.5% qoq to Rs24bn, on back of strong rebound in polymers, fibre intermediates and aromatics margin. With expected improvement of business profile in refining and petchem in the next 2 years, potential upsides from E&P and attractive valuations, we maintain Buy, with a target price of Rs1168 (Roll over on FY17 SOTP),” says Emkay Global Financial Services research report. 

Disclosure: Network18, which publishes moneycontrol.com, is now part of the Reliance Group.

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