01 December 2011

Buy Reliance Industries - Depreciated INR and lower GRMs offset each other; Edelweiss,

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Reliance Industries (RIL IN, INR 778, Buy)

Refining spreads continue to correct sharply led by gasoline and naphtha. Indian complex GRMs have averaged USD8.1/bbl last week. We believe that current low margins are unsustainable especially for new refiners with high capital costs. RIL is relatively better-off as its refinery is diesel-heavy where spreads have remained fairly stable. To account for current low GRMs, we have cut our FY12/13 GRM estimates to USD9.25/bbl and USD10/bbl, respectively. We have built-in lower gas output as well as a weakening INR, taking our FY12 EPS lower by 3.3%. Maintain ‘BUY’ rating with a revised target price of INR 1,134.

Refining margins on downtrend
Refining margins have corrected sharply with Indian complex GRMs dipping to USD8.1/bbl last week from USD13.5/bbl in Q2. The crack in margins is primarily led by gasoline and naphtha. Restart of refineries of Formosa and Shell and weak Asian gasoline demand has resulted in fall in refining margins. Diesel spreads, however, held firm led by rising dieselization and soaring Japanese demand post nuclear shutdown.

Current margins not sustainable
Given the escalating costs of new refineries, we believe that current low margins are not sustainable, therefore expect refiners to adjust their capacities and production slates accordingly. GRMs of USD8/bbl imply an IRR of 8% for new refineries, which we believe is unsustainable.

Adjusting for INR depreciation, lower GRMs & gas production
RIL will be better off given higher share of diesel. However, we do see downside to its GRMs led by Naphtha where spreads are the lowest in 3 years. We now estimate GRMs of USD 9.25/bbl and USD 10/bbl in FY12 and FY13. We have also incorporated lower gas output to account for a faster fall in production and estimate output of 44/39 mmscmd in FY12/13. However, INR depreciation should help, with FY13 EPS going up by 1.5% for a 1% fall in INR. Our revised FY12 EPS now stands at INR69.3, down 3.3%. We maintain our ‘BUY’ rating on the stock with a target price of INR 1,134. At CMP of INR778, the stock is trading at 11.2x FY12 and 10.2x FY13 EPS.


BSE, Bulk deals, 1/12/2011

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Deal DateScrip CodeCompanyClient NameDeal Type *QuantityPrice **
1/12/2011531568Ashutosh PaperARVINDER SINGH PASRICHAB43500172.50
1/12/2011531568Ashutosh PaperGREENLAND PROJECTSB70000172.75
1/12/2011531568Ashutosh PaperASHA PANAGRIAS40000172.50
1/12/2011512149Avance TechB M TRADERSB205942750.20
1/12/2011512149Avance TechMULTIPLIER SHARE & STOCK ADVISORS PRIVATE LIMITEDB45000000.20
1/12/2011512149Avance TechMERITORIOUS REALTY PRIVATE LIMITEDB50000000.20
1/12/2011512149Avance TechVORA FINANCIAL SERVICES PRIVATE LIMITEDB58110010.20
1/12/2011512149Avance TechVORA FINANCIAL SERVICES PRIVATE LIMITEDS88000010.20
1/12/2011512149Avance TechB M TRADERSS373624450.20
1/12/2011524606Beryl DrugsDHAVAL NATVARLAL SHAHB3000019.07
1/12/2011533469Birla Pacific MedspaLINUS HOLDINGS LIMITEDB60000010.20
1/12/2011533469Birla Pacific MedspaWHEELERS DEVELOPERS PVT LTDS60000010.20
1/12/2011511672Clarus FinanceSHREE THIRUMALAI MARKETING & INVESTMENTS LTDB23720138.44
1/12/2011531470EMPORISSHREEBHUVANAKARAM TRADINVEST PRIVATE LTDS8500017.55
1/12/2011504351Empower IndiaADDO CONSTRUCTIONS PVT LTDS64144500.40
1/12/2011509550Gammon IndiaSBI MUTUAL FUNDB167896851.00
1/12/2011509550Gammon IndiaSBI MUTUAL FUNDS167896851.00
1/12/2011531055GFLFINAMIT SAMPATHRAJ SHAHB3000016.25
1/12/2011531055GFLFINASHIANA PROPERTIES (P) LTD.S6540016.25
1/12/2011530689Greenline TeaSANJEEV KUMAR AGARWALS315005.41
1/12/2011532359Hit Kit GlobalPRAKASH BHOORCHAND SHAHB2765720.60
1/12/2011532359Hit Kit GlobalKHEM SUM APPARELS OVERSEAS LTDS2697060.60
1/12/2011530955Kailash FicomNISHU BRIJESH PATELS8690029.22
1/12/2011523810Kaleidoscope FilmsNIDHI MAHENDRA SHAHS37720032.80
1/12/2011530165Kanchan IntlGANESH ANANT GHADGEB5000066.00
1/12/2011530165Kanchan IntlVIPULKUMAR RASIKLAL SHAHS3000066.00
1/12/2011530165Kanchan IntlDHARMENDRA HARILAL BHOJAKS2020066.00
1/12/2011512585Karma IndPARKES MULTI TRADE PRIVATE LIMITEDS17000054.32
1/12/2011531401Khodiyar IndsMOIZBHAI HAKIMUDDIN BORIAWALAB320002.87
1/12/2011530119Natraj ProtDEEPINDER SINGH POONIANB2390010.05
1/12/2011530119Natraj ProtMATRACO FINVEST LIMITEDS2400010.05
1/12/2011511535NDA SecuritiesHIRA LAL SOMANI (HUF)S3000017.35
1/12/2011530971Nimbus IndsMADHUBEN BHAGVANBHAI PATELS3650084.03
1/12/2011531465Nouveau GlobalARVIND JAYANTILAL SHAHS10000002.92
1/12/2011511734Pasupati FinPALAK NILESHBHAI KARIAS3000019.70
1/12/2011526247Premier ExplFE SECURITIES PRIVATE LIMITEDS8800048.56
1/12/2011526247Premier ExplANMOL FINPRO PRIVATE LIMITEDS10098249.86
1/12/2011526823Rajeswari FoundG RAMAMURTHYS4300018.01
1/12/2011511585Regency TrustBIMAL PRAVINCHANDRA KAMDARB5267348.10
1/12/2011531886SCOPE INDHIMADRI JIGAR SHAHB4794024.76
1/12/2011532344Softsol IndiaSOFTSOL INDIA LTDB18150964.42
1/12/2011532344Softsol IndiaNALINI KUMARI PEMMASANIS17565064.45
1/12/2011532221Sonata SoftORANGE MAURITIUS INVESTMENTS LIMITEDB236000025.40
1/12/2011532221Sonata SoftBHUPATI INVESTMENTS AND FINANCE PRIVATE LIMITEDS236000025.40
1/12/2011532249SQL Star-$MADHUKAR CHIMANLAL SHETHB9923994.80
1/12/2011532249SQL Star-$SARVAPRATHAM INVESTMENT LIMITEDS10000004.80
1/12/2011590037Steel Exchange-$TRIPURARI PROPERTIES PRIVATE LIMITEDS24355043.00
1/12/2011512640Stocknet IntlDHARAMVIR SHARMA AND SONS HUFB400061.71
1/12/2011512640Stocknet IntlS S DHANASEKARANS400001.71
1/12/2011517534SV ElectricalsSOUMITRA HIREN CHAKRABORTYB3000009.59
1/12/2011517534SV ElectricalsOPTIMUM BROADBAND SERVICES PRIVATE LIMITEDB1600009.57
1/12/2011517534SV ElectricalsGOLDMOON COMMERCE PRIVATE LIMITEDS2000009.57
1/12/2011517534SV ElectricalsGOLDMINE BARTER PRIVATE LIMITEDS2000009.60
1/12/2011590111VAISHNAVIGUMMADI SESHAGIRI RAOB1973848.81
1/12/2011590111VAISHNAVISAI NITHISHA PARVATHANENIB810008.84
1/12/2011590111VAISHNAVIMAHESHWAR KONDURIS1391428.81
1/12/2011590111VAISHNAVIBALAKRISHNA KOPPULAS800008.85
* B - Buy, S - Sell
** = Weighted Average Trade Price / Trade Price

NSE, Bulk deals, 01-Dec-2011

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DateSymbolSecurity NameClient NameBuy / SellQuantity TradedTrade Price /
Wght. Avg.
Price
Remarks
01-Dec-2011BEDMUTHABedmutha Indust LtdBP FINTRADE PRIVATE LIMITEDBUY1,06,27241.55-
01-Dec-2011BEDMUTHABedmutha Indust LtdBP FINTRADE PRIVATE LIMITEDSELL1,11,27241.44-
01-Dec-2011BEDMUTHABedmutha Indust LtdNITIN BABAJI PALANDEBUY2,39,09741.11-
01-Dec-2011BEDMUTHABedmutha Indust LtdNITIN BABAJI PALANDESELL2,39,09740.36-
01-Dec-2011EVERONNEveronn Education LimitedEMERGING MARKETS MGT L.L.C THE EMM UMBRELLA FUNDSBUY1,14,096355.84-
01-Dec-2011INDOTHAIIndo Thai Sec LtdM RAJENDRA REDDYSELL1,00,00011.20-
01-Dec-2011PRAKASHCONPrakash Constrowell LtdNITIN BABAJI PALANDEBUY75,819219.00-
01-Dec-2011PRAKASHCONPrakash Constrowell LtdNITIN BABAJI PALANDESELL1,65,370212.81-

1/12/11: Categories Turnover (Rs. crore) Clients NRI Proprietary Trade Data

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Categories Turnover
(Rs. crore)
ClientsNRIProprietary
Trade DateBuySalesNetBuySalesNetBuySalesNet
1/12/111,257.691,306.36-48.680.360.290.07434.87398.4836.39
30/11/111,304.511,298.516.000.270.29-0.03423.11427.18-4.07
29/11/111,304.621,284.3320.290.570.360.21418.42448.71-30.29
Dec , 111,257.691,306.36-48.680.360.290.07434.87398.4836.39
Since 1/1/11443,992.63448,498.82-4,506.19311.93216.5395.40129,657.72128,921.35736.37

1/12/11: FII & DII Turnover (BSE + NSE) (Rs. crore)

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FII & DII Turnover (BSE + NSE)
(Rs. crore)
FIIDII
Trade DateBuySalesNetBuySalesNet
1/12/112,422.631,735.37687.26907.861,620.94-713.08
30/11/116,245.156,211.0334.121,942.652,136.47-193.82
29/11/111,937.892,258.76-320.871,172.69811.46361.23
Dec , 112,422.631,735.37687.26907.861,620.94-713.08
Since 1/1/11   *564,915.61588,714.29-23,798.68267,290.89241,117.1226,173.77

FII DERIVATIVES STATISTICS FOR 01-Dec-2011

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FII DERIVATIVES STATISTICS FOR 01-Dec-2011 
 BUYSELLOPEN INTEREST AT THE END OF THE DAY 
 No. of contractsAmt in CroresNo. of contractsAmt in CroresNo. of contractsAmt in Crores 
INDEX FUTURES1150632825.36725241789.4854834713389.711035.87
INDEX OPTIONS58453214328.4552529612768.93170613042115.381559.53
STOCK FUTURES864602048.07719151736.14110719725097.99311.93
STOCK OPTIONS13823329.8613251313.7827735663.1416.09
      Total2923.42


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