Motilal Oswal Maintains Neutral on Reliance Industries

RELIANCE INDS: Announces Feb petchem prices; Margin trend mixed in polymers, strong in polyester; Maintain Neutral

On MoM basis, Feb polymer prices (in rupee terms) are up 3-4%, while polyester prices are up 9-14%.

On QoQ basis (4QFY11 till date v/s 3QFY11), polymer prices are down 1%, while polyester prices are up 17-22%.

Naphtha price is up 1% MoM and 10% QoQ. Naphtha prices have been strong in FY11, led by (1) global economic recovery and (2) higher crude prices.

On the margin front, polymer spreads over naphtha are up 5-11% MoM, while down 0-31%QoQ. Integrated polyester margins are up 13-16% MoM, 22-30%QoQ.

Our key assumptions for RIL: (1) Average gas production of 55/60mmscmd for FY12/13 (current gas volumes are at 52mmscmd); (2) Well-head gas price of US$4.2/mmbtu; (3) GRM of US$9/bbl in FY12 and US$10.2/bbl in FY13. Adjusted for treasury shares, RIL trades at 13.2x FY12E EPS of Rs71.7. We value RIL on SOTP basis to arrive at a price target of Rs975. Maintain Neutral.

Source : Equity Bulls

Keywords