Maintain 'hold' on Reliance Industries (RIL) - TP Rs.847 - Geojit BNP Paribas Financial Services

- 'Hold' rating has been maintained on Reliance Industries with a target price of Rs.847. The stock has been traded in the range of Rs.782.

- The company reported 4QFY13 PAT at Rs.5590 crore, which is up 3% qoq, primarily aided by low depreciation and interest cost.

- However, EBITDA declined 6.5% qoq to Rs.7800 crore due to weakness in the petrochemical segment and continued decline in KGD6 volume, offsetting refining strength.

- KGD6 gas production averaged 19 mmscmd (down 20% qoq).

- The retail business was EBITDA positive at end FY13.

- Next 12 months looks lackluster, growth revival is expected from FY15 onwards.

- The company remains optimistic that its petchem expansion will drive future growth and believes the refining should remain stable.

- Analysts have muted outlook for E&P for FY14 as volume should continue to decline.

- The company is in talk with government of India to relinquish entire acreage excluding the areas where exploration and development activity will be undertaken. Analysts expect that GRM to disappoint in 2H13 as demand may not recover quickly and as more supplies enter the market after the planned shut downs.

- Also, revival in petchem margin may remain product specific. A higher petchem EBIT margin of 11% is forecast for FY14/15.

- The company has started construction work for the new 100000 tpa butyl rubber plant as part of its huge petchem expansion program.

- Lack of near term catalysts result in the range bound performance of the stock. We retain 'hold' rating on the stock.

- Higher than expected refining / petchem margin is the upside risk to the target price. Lack of any E&P progress would be the downside risk.

Source : Equity Bulls

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