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Leader in the pack…
Diversifying into new businesses
• Reliance Industries is India's largest private sector company
operating in three key business segments: petrochemicals,
refining, and oil & gas exploration and production.
• Reliance has crude refining capacity of 62 MTPA in Jamnagar and
is India’s largest private petrochemicals player. The company
made India’s largest gas discovery in the KG-D6 field and is
currently producing ~51 mmscmd of natural gas.
• The company has recently bought stakes in shale gas blocks
internationally to expand its operation in the exploration space.
The company has bought stake controlling stake in Infotel
Broadband to foray in telecom and broadband business. It has
also ventured into financial space and bought 14.1% stake in EIH
Going ahead
• RIL would continue to invest in its traditional petrochemicals
business along with new businesses. The refining &
petrochemical segment which contributes ~ 70 % of EBIT in FY11
would continue to remain core part of Reliance business going
forward.
• RIL’s strong cash flow from existing businesses would be invested
into new businesses like broadband, retail & financial space over
the next few years. However we believe that these businesses
would take 3-5 years before they start contributing to its
profitability.
• Drilling of new wells in the KG basin is expected to increase
production in FY14. Reliance would continue to invest in domestic
fields with BP over the next few years. The gas production from
the new Shale Gas JV’s would commence from FY13E
Valuation
RIL valuations will be led by its traditional businesses, refining and
petrochemicals. Global refining margin will likely be robust (RIL US$11/bl
in FY13E) as product demand from Asia surges and European and the US
stabilize. New discoveries in the KG basin, development of shale gas
blocks and successful diversification in new business could provide
upside to the stock, going forward. E&P will also chip in as key concerns
have been addressed through the British Petroleum (BP) deal, indicating a
strong bottom for its E&P valuations at US$24bn
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