Maintain 'hold' on Reliance Industries - TP Rs.751 - Geojit BNP Paribas Financial Services

- Refining margin in 1QFY13 is likely to be weaker than expected due to weakness in Naphtha and diesel prices. As against the expected margin of UDS7.5/barrel, the company is expected to realize in the range of USD 7-7.3/barrel.

- Despite decline in Naphtha prices, petrochem business may not be benefited because the product prices have collapsed.

- Company is expected to report EBIT margin of 11% for the quarter.

- KG -D6 is expected to have average production of 32mmscmd in 1QFY13.

- Any meaningful catalyst is not found to the company for the next two quarters and earnings are expected to be downgraded after 1Q numbers.

- However, share buy-back may protect downside in the near term.

- Increasing contributions from the cyclical refining and petchem businesses do not bode well to the company in the current environment.

- Niko's recent reserve downgrade will weigh on the prospects of E&P business.

- On product front, gasoline and ATF were firm qoq while naphtha and diesel registered declining margins.

- Low sulphur fuel oil margins were up qoq due to high import demand from Japan.

- Underperformance of the stock is likely to continue due to weakness in E&P, refining and petchem businesses and the company is expected to report a flat quarter on a qoq basis.

Source : Equity Bulls

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