Reliance Industries - Reiterating refining upsides - Edelweiss

Post revisiting our global refining model, we reiterate our positive stance on refining noting that net refining capacity addition will lag demand growth. Also, low distillate inventories pose upside risks to margins. Our proprietary model indicates Reliance Industries' (RIL) Q3/FY13E GRM at USD8.7/>8.5 per bbl.

While refining will be the biggest value driver (6% increase in SOTP for USD1/bbl rise in GRM), outcome of Rangarajan Committee on gas pricing is a key near-term trigger. RIL's abstinence from 2G auctions and rebound in US gas prices are a positive. Our core thesis of USD31bn capex during FY13-17 leading to doubling of EBITDA stays intact.

Maintain 'BUY' with TP of INR906.

Source : Equity Bulls

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