Reliance Industries - Price, price, price - Kotak

We upgrade the RIL stock to ADD from REDUCE previously with a revised 12-month forward SOTP-based target price of Rs. 870 (Rs. 855 previously). The beginning of a significant capex cycle (over US$15 bn) in its core businesses will translate into (1) growth in volumes for the petchem and E&P segments and (2) enhancement of margins for the refining and petchem segments.

We compute FY2017E EPS (standalone adjusted for treasury shares) at Rs. 105 assuming (1) full utilization of expansion projects, (2) reasonable margins for core businesses, (3) revival in gas production and (4) US$8/mn BTU gas price. We compute fair value of Rs. 1,050 (FY2017E EPS basis) assuming a midcycle ex-growth P/E of 10X; the current stock price offers a reasonable upside assuming (1) successful commissioning of expansion projects and (2) a supportive operating environment.

Source : Equity Bulls

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