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Reliance Industries Ltd. — Upgrade PX margin, oil & GRM; more EPS upside possible
Price Objective Change
Strong earnings growth after flat earnings for 2-year; Buy
Singapore GRM is at an 11 quarter high and polyester chain margins at an all
time high. We have raised oil price, PX margins and GRM of Reliance Industries
(RIL). FY11-FY12 EPS is now expected to rise by 29-30% YoY after flat EPS in
FY09-FY10. Growth would be stronger if prevailing strength in polyester margins
and GRM sustain. Thus there may be further EPS upgrades. Deal to sell BP Plc
30% stake in 23 blocks at US$7.2bn has addressed investor concerns in E&P.
We therefore expect RIL’s under-performance to end. We retain Buy on RIL.
Raise FY12-FY13E EPS by 4-7% & PO by 2% to Rs1,244
We have raised FY12-FY13 PX-naphtha margin to US$650/ton from US$500/ton.
RIL’s FY12 GRM is also raised by 4% to US$9.5/bbl. FY11-FY13 Brent price is
raised by 7-18%. FY12-FY13 EPS is raised by 4-7% and PO by 2% to Rs1,244.
Further earnings upgrades appear likely
Our FY12E EPS (Rs80.9) is 11% above consensus. FY12 EPS based on GRM of
US$10/bbl and current polyester chain margins is Rs90.4. It is 12% higher than
our EPS and 24% higher than consensus. Thus, there may be more upgrades.
E&P concerns addressed; under-performance likely to end
RIL’s EPS CAGR was 37% in the last refining and petrochemical super-cycle in
FY03-FY08. Its share price was up 10.5x (BSE-30 was up 5.1x). However, RIL
has under-performed regional peers since August 2010 (RIL down 3% but peers
up 22-101%). This is mainly due to disappointment in E&P. However, the recent
deal with BP appears to have addressed concerns in E&P. Strong EPS growth,
EPS upgrades and positive E&P news flow may help end underperformance.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance Industries Ltd. — Upgrade PX margin, oil & GRM; more EPS upside possible
Price Objective Change
Strong earnings growth after flat earnings for 2-year; Buy
Singapore GRM is at an 11 quarter high and polyester chain margins at an all
time high. We have raised oil price, PX margins and GRM of Reliance Industries
(RIL). FY11-FY12 EPS is now expected to rise by 29-30% YoY after flat EPS in
FY09-FY10. Growth would be stronger if prevailing strength in polyester margins
and GRM sustain. Thus there may be further EPS upgrades. Deal to sell BP Plc
30% stake in 23 blocks at US$7.2bn has addressed investor concerns in E&P.
We therefore expect RIL’s under-performance to end. We retain Buy on RIL.
Raise FY12-FY13E EPS by 4-7% & PO by 2% to Rs1,244
We have raised FY12-FY13 PX-naphtha margin to US$650/ton from US$500/ton.
RIL’s FY12 GRM is also raised by 4% to US$9.5/bbl. FY11-FY13 Brent price is
raised by 7-18%. FY12-FY13 EPS is raised by 4-7% and PO by 2% to Rs1,244.
Further earnings upgrades appear likely
Our FY12E EPS (Rs80.9) is 11% above consensus. FY12 EPS based on GRM of
US$10/bbl and current polyester chain margins is Rs90.4. It is 12% higher than
our EPS and 24% higher than consensus. Thus, there may be more upgrades.
E&P concerns addressed; under-performance likely to end
RIL’s EPS CAGR was 37% in the last refining and petrochemical super-cycle in
FY03-FY08. Its share price was up 10.5x (BSE-30 was up 5.1x). However, RIL
has under-performed regional peers since August 2010 (RIL down 3% but peers
up 22-101%). This is mainly due to disappointment in E&P. However, the recent
deal with BP appears to have addressed concerns in E&P. Strong EPS growth,
EPS upgrades and positive E&P news flow may help end underperformance.
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