RIL: EBITDA and PAT largely in line:: Motilal Oswal

Visit http://indiaer.blogspot.com/ for complete details �� ��


 EBITDA and PAT largely in line: Reliance Industries (RIL) reported EBITDA of Rs94b (+30% YoY; 1% QoQ),
marginally lower than our estimate of Rs97.6b. EBITDA was lower than expected, as E&P profit was lower than
estimated, led by PMT shutdown, partially compensated by higher petchem margins. PAT was in line with our
estimate at Rs49.2b, up 28% YoY and 1% QoQ.




 GRM at US$7.9/bbl; premium of US$3.7/bbl over Singapore GRM: GRM was in line with our estimate at US$7.9/
bbl (v/s US$7.3/bbl in 1QFY11 and US$6/bbl 2QFY10). Premium over benchmark Singapore GRM expanded QoQ
from US$3.4/bbl to US$3.7/bbl, led by higher light-heavy crude differentials and improved diesel cracks.

 KG-D6 volumes unlikely to increase before 4QFY12: In July 2010, RIL had indicated delay in KG-D6 production
ramp-up and a time frame of 6-12 months to conduct reservoir studies. The management has now guided that KG-D6
production would increase only in 4QFY12. (We had already cut our production assumption to 60mmscmd for FY12)
 Petchem segment continues to shine; outlook positive: Petchem EBIT margin was 14.6% as against 14.8% in
1QFY11 and 16.5% in 2QFY10. The management indicated that fears of supply glut due to new Middle East capacities
are overplayed, as almost all the capacities (except 2 crackers) have already been commissioned.
 Key things to watch: (1) clarity on 7-year income tax holiday for KG-D6 gas (we model tax holiday), (2) margin
trends in refining and petchem, (3) execution on downstream projects announced in AGM (off-gases cracker, PX/PTA
expansion and IGCC), and (4) developments on BWA foray.
 Valuation and view: We are reducing our exchange rate assumption for 2HFY11 from Rs46/US$ to Rs44.5/US$
and maintain Rs44.5/US$ for FY12. We are increasing our margin assumptions for key petchem products, resulting
in our petchem EBIT margin estimate for FY12 increasing from 13.2% to 14.2%. Based on these changes in
assumptions, we cut our FY11E EPS by 1% to Rs67.3 and increase our FY12E EPS by 2.8% to Rs73. We are
reducing our SOTP-based target price from Rs991 to Rs975.