Reliance Industries (BOM:500325)

QUOTE AND NEWS
The Economic Times  May 21  Comment 
'Reliance Industries Ltd is a 'BUY' call with a target of Rs 935 and a stop loss of Rs 900'
The Economic Times  May 20  Comment 
Mukesh Ambani has kept his salary as the head of Reliance Industries capped at Rs 15 crore for the seventh consecutive year.
Reuters  May 20  Comment 
Reliance Industries Ltd , building the nation's biggest 4G telecommunications network, is "working aggressively" to meet a rollout target set by the government, the company said in its annual report.
The Economic Times  May 20  Comment 
Gujral feels that the whole texture of the market is positive as banks, IT and Nifty heavyweight Reliance Industries are heading up.
The Hindu Business Line  May 19  Comment 
Dutch lingerie brand Hunkemöller has announced an exclusive long-term franchise agreement with Reliance Brands Ltd, a part of Reliance Industries Group. Reliance Brands will bring intern...
The Hindu Business Line  May 19  Comment 
Reliance Industries has issued a $200 million 20-year callable Formosa at par to yield 5 per cent. The deal is the first Formosa bond from an Indian company. The notes are call...
The Economic Times  May 19  Comment 
'Reliance Industries Ltd is a 'conditional BUY' call with a target of Rs 925 and a stop loss of Rs 884'
The Economic Times  May 18  Comment 
'Reliance Industries Ltd is a conditional 'BUY' call with a target of Rs 920 and a stop loss of Rs 878'
The Times of India  May 17  Comment 
The government may allow a part of the natural gas produced by firms like ONGC and Reliance Industries from new discoveries to be sold at market price as it looks to boost domestic exploration and production.
The Hindu Business Line  May 14  Comment 
Reliance Industries is in talks with Chinese manufacturers to secure cut-price phones that could be sold in packages from $30, as it seeks to repeat the low-cost revolution it unleashed with its f...





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Business Profile

Reliance Industries (RIL), established in 1966, is the flagship company of the Reliance group. The company started with textiles and thereafter backward vertical integrated in polyester, fiber intermediates, plastics, petrochemicals, petroleum refining and oil and gas exploration and production.

RIL is a leading producer of polyester yarn and fiber producer and amongst the major producers of petrochemical products in the world.

The company`s operations can be classified into three segments that of petroleum refining and marketing business, petrochemicals business and others (including crude oil and natural gas exploration and production business)

Presently, the company`s activities span exploration and production of oil and gas, petroleum refining and marketing, petrochemicals (polyester, fibre intermediates, plastics and chemicals), textiles and retail.

Some of RIL`s group companies include Reliance Petroleum (RPL), Reliance Retail, Indian Petrochemicals Corporation (IPCL) and Reliance Industrial Infrastructure.

RIL has manufacturing facilities at Naroda, Patalganga, Hazira and Jamnagar.


RIL has rallied 16% over last month even as refining margins have fallen. Lower-thananticipated margins present the biggest risk to our estimates and valuation. We maintain our Rs1,850 target price and downgrade the stock from Hold to Sell.

Refining looking shaky Singapore complex refining margins have averaged US$4.6/bbl to date in 2QFY09, according to Reuters, compared to US$8.2/bbl in 1QFY09 and US$6.4/bbl in 2QFY08. Gasoline margins have been weak even in the traditionally strong April-July period as US demand has declined. Given US car manufacturers are replacing their truck plants with small car plants, this decline could be structural rather than cyclical. Middle distillate (diesel/jet fuel) margins have been very strong (US$30/bbl+) since March 2008, but have dropped by US$10/bbl in August. Basically, demand growth appears to be slowing down just as new refining capacity is set come on stream. We believe the refining cycle will turn down from FY09 and forecast RIL GRMs will decline from US$15/bbl in FY08 to US$12.5/bbl in FY10. But, just as the upside in GRMs over last three years was under-estimated by the market (RIL GRM in FY04 was US$6.4/bbl), it is possible the downside will also end up looking worse.

Upsides all in E&P We have assumed that RIL will sell 40mmscmd of gas to RNRL/NTPC for the next 17 years at the disputed contract price (US$2.6mmbtu), however litigation on this issue is continuing. If there were no such liability, our FY10 and FY11 EPS estimates would rise to Rs206 and Rs192 respectively and our valuation could increase to Rs2,000, assuming no other changes. There is potential for surprises in terms of large new discoveries. However, our valuation is based on a gross reserve estimate of 7.7bn boe by March 2009, compared to RIL's disclosed 2P reserve estimate of 4.4bn boe.

Downgraded to Sell, target price Rs1,850 We maintain our EPS estimates and our SOTP-based target price, which values RIL as of end- FY09 (post conversion of promoter warrants). Our estimates factor in no government policy risks from any imposition of minimum alternate tax (MAT) on Reliance Petroleum, loss of tax holiday for gas production or any export tax on refined products.

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