The stock broking house expects growth in the E&P segment to continue in coming quarters and refining performance to improve on rising throughput and stabilizing margins, petrochemicals might underperform given rising West Asian (Mid-East) capacities.
With D6 volume now averaging 60m cmd, the broker house expects RIL to meet the full year (FY10) target of 40m cmd production. With GAIL`s HBJ pipeline still far from complete, the estimate of 80m cmd for FY11 might be hit slightly, neutralized possibly, though, by higher volumes later.Though Reliance`s (Q,N,C,F)* refining margin was higher than our estimate (USD 5.5), EBIT margin at USD 2.4/bbl matched our estimate, implying higher costs.
The investment research team expects RIL`s 4Q refining margin performance to improve from 9M levels, in line with rising regional and global margins, on the back of higher winter demand.
With E&P going strong and refining possibly past the worst, the broking house sees a coming petrochemicals capacity glut and possible RNRL case judgement to be key factors weighing on valuations. Any possible inorganic or organic growth plans would also be key to valuations.
The company slightly revised FY10-12e earnings by 1-2%, to adjust for 9M performance.
The company has raised target price to Rs 1,120, adjusting for debt and investments. Maintain Hold.
