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Core business margins to stabilise: RIL reported robust refining
margins of US$9.2/bbl in 4QFY2011, albeit marginally below
our expectations. However, with the start of its FCCU, we expect
RIL to report higher refining margins in the coming quarters.
Similarly, in the petchem side, we do not expect margins to fall
below the current level consequent to higher demand from
emerging economies and recovery in OECD economies.
KG D6; Just a beginning: The upstream segment still has Equity Value (`) 1,189
a 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
KG-D6 due to constraints over reservoir pressure, we are
confident that it will ramp up its production over the medium
term with the help of BP's technical expertise.
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 a significant cash
pile and treasury stocks. Initiatives such as shale gas
acquisitions, with in-place reserves of ~12TCF could prove to
be a potential trigger for the stock in the long term.
Outlook and valuation: The stock is currently trading at FY2013E
P/BV of 1.4x, which is ~30% lower compared to Sensex P/BV.
Timely ramp-up in 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 DGH approvals are in place. Valuations could receive
further boost on any improvement in refining and polymer
margins consequent to recovery in global demand. Further,
financials of RIL are relatively immune to increases in interest
rates (as it has low debt-equity ratio) or declines in GDP
forecasts. Hence, we maintain Buy on RIL with an SOTP-based
target price of `1,189.
Valuations based on SOTP
Source: Company, Angel Research
Business segment `/share
Refining (EV/EBITDA 7x) 391
Petrochemical (EV/EBITDA 7x) 219
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
Other prospective basins 41
Retail 30
Investment/Others 44
Total EV 1,204
Net debt (15)
Equity Value (`) 1,189
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Core business margins to stabilise: RIL reported robust refining
margins of US$9.2/bbl in 4QFY2011, albeit marginally below
our expectations. However, with the start of its FCCU, we expect
RIL to report higher refining margins in the coming quarters.
Similarly, in the petchem side, we do not expect margins to fall
below the current level consequent to higher demand from
emerging economies and recovery in OECD economies.
KG D6; Just a beginning: The upstream segment still has Equity Value (`) 1,189
a 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
KG-D6 due to constraints over reservoir pressure, we are
confident that it will ramp up its production over the medium
term with the help of BP's technical expertise.
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 a significant cash
pile and treasury stocks. Initiatives such as shale gas
acquisitions, with in-place reserves of ~12TCF could prove to
be a potential trigger for the stock in the long term.
Outlook and valuation: The stock is currently trading at FY2013E
P/BV of 1.4x, which is ~30% lower compared to Sensex P/BV.
Timely ramp-up in 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 DGH approvals are in place. Valuations could receive
further boost on any improvement in refining and polymer
margins consequent to recovery in global demand. Further,
financials of RIL are relatively immune to increases in interest
rates (as it has low debt-equity ratio) or declines in GDP
forecasts. Hence, we maintain Buy on RIL with an SOTP-based
target price of `1,189.
Valuations based on SOTP
Source: Company, Angel Research
Business segment `/share
Refining (EV/EBITDA 7x) 391
Petrochemical (EV/EBITDA 7x) 219
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
Other prospective basins 41
Retail 30
Investment/Others 44
Total EV 1,204
Net debt (15)
Equity Value (`) 1,189
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