Reliance Industries (BOM:500325)

QUOTE AND NEWS
The Economic Times  Jun 4  Comment 
Buy Reliance Industries Ltd. at a price target of Rs 960 and a stop loss at Rs 915 from entry point.
The Hindu Business Line  May 31  Comment 
Reliance Industries retains the crown being the country’s most profitable company for third year in a row
The Economic Times  May 30  Comment 
Reliance's call to quit buying oil from Iran followed Washington's decision to abandon the 2015 nuclear accord which has raised the threat of sanctions on entities dealing with Iran.
The Economic Times  Apr 16  Comment 
Reliance Industries, which had submitted a resolution plan along with JM Financial Asset Reconstruction Company for Alok Industries, had informed that its bid has been rejected by the CoC.
The Economic Times  Apr 16  Comment 
Reliance Industries, in partnership with J M Financial ARC, was the sole bidder for the bankrupt company that is facing claims of Rs 29,500 crore from financial creditors.
The Hindu Business Line  Apr 15  Comment 
Reliance Industries today said the its resolution plan for acquiring Alok Industries in conjunction with JM Financial Asset Reconstruction Company h
The Hindu Business Line  Apr 13  Comment 
Reliance Industries Ltd has entered into an agreement to acquire 72.7 per cent stake in education technology provider Indiavidual Learning to strengt
The Hindu Business Line  Apr 13  Comment 
Plans to invest $180 million in 3 years
The Hindu Business Line  Apr 12  Comment 
Reliance Industries along with JM Financial Asset Reconstruction has acquired the debt-laden textile company Alok Industries in a National Company Law
The Economic Times  Mar 28  Comment 
Sell Reliance Industries Ltd. at a price target of Rs 860.0 and a stop loss at Rs 908 from entry point.





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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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