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Analyst Research Report Snapshot


Reliance Inds. (RIL) - Qtr. Update - Dtd. - October 15, 2012




Axis Capital Limited


15 Oct 2012





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RIL reported Q2FY13 PAT at Rs 54 bn, up 20% QoQ, led by strong performance from refining segment. Refining EBIT increased 65% QoQ to Rs 35 bn due to strong GRM (US$ 9.5/bl) and highest-ever throughput of 17.6 MMT. Global refinery outages, seasonal pick-up in Asia-Pac demand, and increase in light-heavy differentials supported sharp recovery in RIL’s GRM. Key takeaways from analyst meet: Refining  Global refinery outages, which were abnormally high in Q2FY13, would come back to production putting pressure on near-term GRM. E&P  In talks with government for gas price hike, which is key for viability of integrated FDP  Integrated FDP submission for satellite fields delayed to H2FY13 (vs. Q3FY13 earlier)  Recovery in US gas price to US$ 3.3/mmbtu to improve RIL’s shale gas profitability Petrochemicals  Despite strong domestic demand, petchem margins to remain muted in near term due to weak Chinese demand  PTA outlook for next 2-3 years weak due to new capacity additions Near term upside limited; future growth drivers in place New projects (petchem capacity addition, petcoke gasification and refinery off-gas cracker) are likely to be commissioned over FY14-17, which would lead to a significant improvement in EBITDA beyond FY15E. However, falling D-6 output and weak cyclical margin would lead to muted growth over FY12-14E. Clarity over gas price hike and approval of revised Field Development Plans (FDP) for D6 are key near term triggers. Maintain HOLD with target price of Rs 850, which implies 3% upside. At CMP of Rs 823, the stock trades at 13x FY13E EPS of Rs 63 and 12x FY14E EPS of Rs 67. Key Assumptions: Crude at USD 110/ bbl for FY13 and USD 90/ bbl for FY14. INR/ USD at 53.3 for FY13 and 50.1 for FY14. Regards, Amit Mishra, CFA (Sr VP – Energy) Institutional Equity Research ENAM Securities Pvt. Ltd. Tel: +91 22 4325 1142 Prashant Tarwadi (AVP – Energy) Institutional Equity Research ENAM Securities Pvt. Ltd. Tel: +91 22 4325 1113

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