For Q2FY12, Reliance Industries’ (RIL’s) EBITDA and PBT were broadly in line with Prabhudas Lilladher's expectations. EBITDA, during the quarter, registered a growth of 4.8% y-o-y on the back of strong refining margins and stood at Rs98.4bn against their expectation of Rs97.2bn.
- Key features during the quarter were a) improved refining margins (US$10.1/bbl v/s US$7.9/bbl in Q2FY11) and b) lower KG-D6 gas production at 45mmscmd compared to 59mmscmd in Q2FY11. Refining EBIT declined 3.9% on sequential basis on the back of lower refining margins, thereby, forming 43.7% of the total EBIT during the quarter compared to 45.5% in Q1FY12.
- Prabhudas Lilladher believe that negative developments viz. expectation of subdued gas production outlook from the KG basin over the period of next 2-2.5 years, reduction of KG-D6 gas supplies for the refining and petrochemical business, along with limited upsides in commodity margins in petrochemical and refining segment in the near term, are likely to result in stagnant profitability for RIL in the near term.
- The same is likely to result in absence of any meaningful stock price trigger in the near term. Another major concern, which RIL continues to face, is deployment of the cash flows. However, on the flipside, all the negatives are largely factored into the stock price. Moreover, long-term promises of RIL’s E&P blocks are undeniable as reflected by RIL-BP deal.
On the valuation front, given the recent strong outperform over the last couple of weeks, Prabhudas Lilladher believe the stock offers limited upside potential from the current levels. They maintain an ‘Accumulate’ rating on the stock, with a target price of Rs952/share.
Click here to read the full report
Prabhudas Lilladher has a nationwide distribution network, consisting of branches, franchisees and associates, providing a comprehensive gamut of financial services in the Institutional and Retail domain. Their services includes Equity, derivatives; margin funding, mutual funds, PMS, IPOs and online trading.
For more information please write in to firstname.lastname@example.org
Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.
- Reliance Ind Q1FY15: EBITDA stands at Rs75.3 bn, up 6% y-o-y; Neutral
- Technical Call: Buy Reliance Industries
- Reliance Industries : Annual report analysis
- Reliance Industries: Time for another long-term entry
- Reliance Industries: AGM Takeaways - Focus on ongoing capex execution
Have a question?
Technical Project Manager - MSD, Singapore
Also On IndiaNotes.Com
- Tracing the trend of increasing loans against shares
- Govt. set to make more employees eligible for annual bonuses
- Everest Industries Q2FY15: Positive results despite lower margin in Steel building; buy
- ING Vysya Q2FY15: Change in guard creates uncertainty in an otherwise stable performance