Reliance Industries (BOM:500325)

QUOTE AND NEWS
The Hindu Business Line  Oct 20  Comment 
Niko Resources Ltd, a partner of Reliance Industries Ltd in the D6 block in the Krishna Godavari basin, said on Monday it is currently evaluating the impact of the new domestic gas prici...
The Hindu Business Line  Oct 16  Comment 
Moody’s Investors Services today said Reliance Industries’ credit metrics will remain stable over the next 12 months on the back of strong earnings contribution across the refining and petrochemic...
Reuters  Oct 14  Comment 
Reuters Markte Eye - The BSE Sensex and Nifty are largely flat. Reliance Industries Ltd gains 1.1 after its July-September earnings beat estimates.
The Economic Times  Oct 14  Comment 
Reliance Industries gained over 2 per cent in early trade after reporting better-than-expected earnings for quarter ended September.
The Hindu Business Line  Oct 13  Comment 
Reliance Industries managed a marginal 1.7 per cent year-on-year growth in consolidated profit in the September quarter, despite its revenue shrinking nearly 5 per cent. This was mainly...
The Economic Times  Oct 13  Comment 
Mukesh Ambani said RIL is investing close to $16 bn in expanding petrochemical production capacity & to lower feed & fuel costs to boost profits.
The Hindu Business Line  Oct 13  Comment 
The stock of Reliance Industries will react to its financial numbers, which were announced post market hours on Monday. The numbers beat analysts’ expectations. Analysts were expecting the...
The Economic Times  Oct 13  Comment 
Reliance Industries Ltd posted a net profit of Rs 5972 crore, up 8.8 per cent YoY in the second quarter of the current financial year.
Wall Street Journal  Oct 13  Comment 
India conglomerate Reliance Industries Ltd. recorded a 1.7% increase in its net profit for the three months ended Sept. 30 from a year earlier, boosted by improved margins at its oil-refining business.
The Economic Times  Oct 13  Comment 
The company may post a 4% growth in net profit from a year earlier, analysts predict, although a majority of them believe earnings growth will be flat.





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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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