'Buy' Reliance Industries on improved shale gas, refining biz: Edelweiss

Apr 22 2014, 10:32 IST
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Reliance Industries' Q4 FY14 PAT of Rs 5,630 crore was lower than estimated Rs 5,670 crore. Reuters Reliance Industries' Q4 FY14 PAT of Rs 5,630 crore was lower than estimated Rs 5,670 crore. Reuters
SummaryReliance Industries' Q4 FY14 PAT of Rs 5,630 crore was lower than estimated Rs 5,670 crore.

We reiterate a Ďbuyí rating on Reliance Industries

and raise our target price to Rs 1,064 (earlier R1,020). We continue to like RIL, led by Ebitda CAGR of over 20% over FY15-17e driven by high returns from this capex, growth in shale gas and cyclical improvement in chemicals/refining.

RILís Q4 FY14 PAT of R5,630 crore (up 2.2% sequentially) was lower than estimated R5,670 crore due to lower other income which offset higher operating income from refining and petchem segments.

While the KG-D6 gas production at 14 mmscmd rose sequentially, the Tapti gas production continued to fall. RIL expects KG-D6 production to recover to ~15mmscmd over the next quarter end as it has hooked the MA-08 well. The management remained unclear and non-committal on the implementation of gas prices, though they continue to remain positive on gas price implementation. Shale gas continued high growth with production increasing 2.8% sequentially to 13.6 mmscmd. Shale ebitda rose to $199 million ($174 million in Q3FY14). Retail ebitda was R920 million (2.5% margin versus 0.7% in FY13 and 2.7% in Q3FY14).remains positive.

Gross refining margins (GRMs), at $9.3 per barrel, were up 22.4% sequentially due to improvement in gasoline cracks. Refining ebit was up 25.9% q-o-q and 12.3% y-o-y. Refining throughput at 17.0 mmt was flat sequentially. Petchem ebitda margin rose to $109 per mt from $101 per barrel in Q3 FY14. Lower petchem volumes impacted ebit.

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