Neutral on Reliance Industries - Q4 FY 2011 Result Update - Motilal Oswal

Reliance Industries (RIL IN; Mkt Cap USD77.1b, CMP Rs1,040, Neutral)

RIL's 4QFY11 EBITDA was Rs98b , as FCC shutdown in the DTA refinery led to lower than expected GRM.

Against our estimate of US$10.2/bbl, GRM was US$9.2/bbl. The impact of lower GRM on PAT was partly mitigated by higher other income and lower tax rate.

GRM was US$9.2/bbl in 4QFY11 (v/s US$7.5/bbl in 4QFY10 and US$9.0/bbl in 3QFY11). Premium over Singapore GRM contracted to US$1.8/bbl in 4QFY11.

The management did not provide any guidance on KG-D6 ramp-up and indicated that the reservoir studies could take another six months.

RIL faces a challenge of effectively deploying cash & equivalents estimated at ~US$28b. The management has indicated that it is pursuing organic as well as inorganic growth opportunities. We are cutting our FY12/FY13 KG-D6 gas production assumptions from 55/60mmsmcd to 50/55mmscmd, resulting in a ~Rs1 cut in our EPS estimates. The stock trades at 14.6x FY12E EPS of Rs71.2. We maintain our SOTP-based target price at Rs1,028. Neutral.

Source : Equity Bulls

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