Corporate Jan 21, 2013
Reliance Industries today soared 6 percent to touch a 52-week high of Rs 954.80 after it surprised the street by posting 24 percent rise in December quarter profits supported by stronger than expected refining margins and good demand for petro-chemicals.
Net profit for the October to December quarter was Rs 5500 crore, a turnaround after four quarters of sliding profits. Revenues rose 10 percent, from a year earlier, to Rs 96,310 crore. The gross refining margin, which represents the differential between the product prices and cost of crude oil needed to produce them, stood an impressive $9.6 per barrel as compared to street expectations of US$8.5/barrel.
However, while most analysts expect the stock to touch Rs 11,00 in the near future, some are slightly bearish on the stock.
IDFC cut its ratings on Reliance Industries to 'neutral' from 'outperform', citing valuation concerns after a recent rally in shares of the energy conglomerate.
The brokerage said Reliance's current share prices are already factoring in "healthy" gross refining margins, better petrochemicals spreads and a rise in exploration and production volumes.
But others are bullish and expect the stock to hit the four-digit mark soon.
The Petrochemicals segment contributed 31 percent of ebit ( Earnings before interest and tax) margins and 20 percent of revenues at Rs 1937 crore against Rs 2157 crore in third quarter of financial year 2012. RIL Chairman Mukesh Ambani last week said RIL is investing over Rs 100,000 crore by expanding its petrochemical capacities and adding value to its refining business.
RIL's new petrochem facilities start-ups scheduled from 4QFY13 to FY17 are amongst the world's largest, with operational costs likely to be nearly as low as the Middle East, noted Macquarie in its latest research report on RIL.
"Though the company's, exploration and production (E&P) continues to decline, the street is already factoring-in that decline. So, refining and petchem are the main drivers for the company right now,"Mehul Thanawala of JM Financial told CNBC TV18.
RIL is generally owned by large global funds with huge appetite. The oil & gas major, which has the maximum weightage in the benchmark index of 9.4 percent, is likely to lead the next leg of the rally for markets, according to experts.
"After a long time RIL has surprised markets with an extremely good set of numbers and this is what market participants were anticipating from the oil & gas major. It's just a matter of time -- I see the stock heading towards four digits mark," says Jagannadham Thunuguntla, Equity Head, SMC Capitals in an interview with ET NOW.
"Given the fact, the stock is underowned, many funds are likely to jump to own the stock after the results and that should push the stock higher and should now lead the next leg of the market rally," he added.
Ambreesh Balinga, market expert expects the stock to fly in trade on Monday morning . Balinga is of the view that going ahead, once we have March quarter results, RIL can very well move towards levels of Rs 1150 by April-May.
Ahead of the results many brokerage firms had upgraded their price targets and ratings for the oil & gas major.
Brokerages like Credit Suisse and CLSA have maintained outperform rating on RIL and raised their target price on expectations of improved earnings in coming years as the company continues its capex plans, better gross refining margins, retail business and higher gas prices.
Macquarie has upgraded the stock to outperform as it sees earnings improve on the back of capex. It sees the stock to hit Rs 1,100 in next 12-months.
With inputs from Agencies
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