"Reliance Industries Ltd (RIL) reported net Profit of Rs 5376cr, slightly below our expectation (Rs 5410 cr). Net profit improved by 21% y-o-y, mainly due to higher other income and posted better refining margins of $9.5/bbl. Net sales improved by 15% to Rs 90,335 cr on Y-o-Y largely due to higher prices of products and increase in volume. Other income was higher at Rs2,112 cr as against Rs 1,345 cr on a y-o-y basis primarily due to higher average liquid investments of Rs 79,159cr.
Oil & Gas: 37% Dip in revenue on Y-o-Y basis and ~10% on Q-o-Q basis to Rs 2,254cr mainly due to fall in production to the level of 28.8 mmscmd (AvgQ2FY13) and natural decline continue in PMT field. Weaker rupee helped to realize 20% higher revenue in rupee term on Y-o-Y basis. RIL continues to highlight that complexity of reservoir and higher water cut have been causing the production decline. Oil and gas production from PMT fields was also down ~9% and ~6% Q-o-Q respectively; these fields are in natural decline. In order to ramp-up production over the next three to four years, RIL is focusing on KG D6, NEC-25, Panna-Mukta-Tapti and coal bed methane blocks. In August 2012,RIL-BP submitted a revised field development plan for currently producing D1-D3 fields to the Management Committee. This revised FDP calls for installation of increased water handling capacity and additional compression capacity over the next 2-3 years to address the decline in reservoir pressure. RIL believes this will help it to increase the reserve life of current producing fields.
Refining & Marketing: Revenue increased by 23% on y-o-y basis to Rs 83,878cr in Q2FY13. Increase in revenue principally due to higher price environment of products (18%) and increase in volume accounted by 1.4%. GRM were $9.5/bbl, $0.4/bbl premium to Singapore complex GRM. 25% rise in GRM on Y-o-Y basis mainly Diesel, Gasoline cracks are strengthened on the back of strong Indian demand and series of outages in Japan, china and Malaysia.
We believe that refining margin is improving backed by regional refineries shutdown. We expect RIL will maintain run rate of $8.5/bbl in 2HFY13. Any gradual recovery in downstream demand and improvement in global operating rates would be positive trigger for petchem and we are more positive on upstream (pick up in shale gas). We recommend Accumulate with the target price of Rs 875/share," says KRChoksey research report.
FIIs holding more than 30% in Indian cos
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Investing in RIL or anyother large stock, should be done only after carrying out significant amount of research on the current status of the company.
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