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KG-D6 - Just the beginning: The upstream segment still has
significant upside in store, considering huge untapped resources.
Timely ramp up in the producing fields would bring into picture
other prospective basins also. Although RIL is producing natural
gas below its potential 80mmscmd from KGD6 due to constraints
over reservoir pressure, we are confident that it will ramp up to
its estimated peak production in the coming quarters.
Core business margins to stabilise: RIL reported higher petchem
and refining margins in 3QFY11 YoY consequent to higher
demand from the emerging economies and recovery in the OECD
economies. We expect the margins to stabilise at these levels in
the coming quarters on account of sustainable demand in the
Asian regions.
Low penetration an opportunity
Prospective Basins In Place Resources (TCF)
NEC-25 8.0
D3 9.5
D9 5.5
CBM & Other prospective basins 10.0
Shale Gas ventures 11.8
Total 44.8
Newer ventures could be a long-term catalyst: RIL has been
eyeing inorganic routes for diversifying its asset portfolio by
entering into newer ventures, on the back of significant cash pile
and treasury stocks. Initiatives like shale gas acquisitions, with in
place reserves of ~12TCF could prove to be a potential
trigger for the stock in the long term.
Outlook & Valuation: Timely ramp up in the producing fields
could rerate the stock, as it will bring into picture other
prospective basins also. The high potential exploratory fields
would provide further visibility once the DGH approvals are in
place. Valuations could receive further boost on any
improvement in the distillate and polymer cracks consequent to
recovery in global demand. We maintain a Buy on RIL, with a
SOTP-based Target Price of `1,160, translating into an upside
of 26.2% from current levels.
Valuations based on SOTP
Source: Company, Angel Research
Business segment `/share
Refining (EV/EBITDA 7x) 376
Petrochemical (EV/EBITDA 7x) 272
KG-D6 Gas (DCF) 182
KG-MA Oil (DCF) 45
NEC-25 (EV/boe 5.5x) 66
D3 (EV/boe 5.5x) 73
D9 (EV/boe 5.5x) 43
Shale Gas ventures (EV/boe 3.5x) 70
CBM & Other prospective basins 68
Retail 30
Investment/Others 44
Total EV 1,270
Net debt (110)
Equity Value (`) 1,160
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
KG-D6 - Just the beginning: The upstream segment still has
significant upside in store, considering huge untapped resources.
Timely ramp up in the producing fields would bring into picture
other prospective basins also. Although RIL is producing natural
gas below its potential 80mmscmd from KGD6 due to constraints
over reservoir pressure, we are confident that it will ramp up to
its estimated peak production in the coming quarters.
Core business margins to stabilise: RIL reported higher petchem
and refining margins in 3QFY11 YoY consequent to higher
demand from the emerging economies and recovery in the OECD
economies. We expect the margins to stabilise at these levels in
the coming quarters on account of sustainable demand in the
Asian regions.
Low penetration an opportunity
Prospective Basins In Place Resources (TCF)
NEC-25 8.0
D3 9.5
D9 5.5
CBM & Other prospective basins 10.0
Shale Gas ventures 11.8
Total 44.8
Source: Company, Angel Research
Newer ventures could be a long-term catalyst: RIL has been
eyeing inorganic routes for diversifying its asset portfolio by
entering into newer ventures, on the back of significant cash pile
and treasury stocks. Initiatives like shale gas acquisitions, with in
place reserves of ~12TCF could prove to be a potential
trigger for the stock in the long term.
Outlook & Valuation: Timely ramp up in the producing fields
could rerate the stock, as it will bring into picture other
prospective basins also. The high potential exploratory fields
would provide further visibility once the DGH approvals are in
place. Valuations could receive further boost on any
improvement in the distillate and polymer cracks consequent to
recovery in global demand. We maintain a Buy on RIL, with a
SOTP-based Target Price of `1,160, translating into an upside
of 26.2% from current levels.
Valuations based on SOTP
Source: Company, Angel Research
Business segment `/share
Refining (EV/EBITDA 7x) 376
Petrochemical (EV/EBITDA 7x) 272
KG-D6 Gas (DCF) 182
KG-MA Oil (DCF) 45
NEC-25 (EV/boe 5.5x) 66
D3 (EV/boe 5.5x) 73
D9 (EV/boe 5.5x) 43
Shale Gas ventures (EV/boe 3.5x) 70
CBM & Other prospective basins 68
Retail 30
Investment/Others 44
Total EV 1,270
Net debt (110)
Equity Value (`) 1,160
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