: Reliance Industries Ltd: BUY, Target Rs3198.



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Reliance Industries Ltd

CMP Rs2,346, BUY

Target price Rs3,198, Upside 36.3%

Reliance Industries Ltd (RIL) is unfolding a multi sector growth story. With commencement of KG-D6 production in H2 FY09, it will monetize just one of its rich E&P assets. Projects such as MA-1 oil, KG-D9, CBM Sohagpur have great potential. RIL along with RPL is well poised to gain significantly from the extended uptrend in the refining sector. Its integrated structure for petrochemical business would help it post a standout performance despite a slowdown in the cycle. With its enviable success record in executing large scale projects, RIL is venturing in a big manner in to set up Retail and SEZ projects. We recommend a BUY on the stock with a target price of Rs3,198, an upside of 36.3%.

SOTP valuation under base case

Segment

Parameter

Rs mn

US$mn

Rs/share

Refining

8x FY10 EBIDTA

910,955

22,774

627

Petchem

8x FY10 EBIDTA

662,510

16,563

456

E&P

DCF for KG D6 and EV/Boe for others

1,409,281

35,232

970

RPL

70% @ Rs217 (EV/EBDITA of 9x FY10 E)

683,550

17,089

470

Reliance Retail

DCF (sales of US$150/sqft)

348,219

8,705

240

SEZ

Rs40mn/acre (7,500 acres)

225,000

5,625

155

Total

 

4,239,515

105,988

2,918

Net Debt

 

247,415

6,185

170

Net Value

 

3,992,100

99,802

2,747

Treasury stock

 

654,390

16,360

450

Total value

 

4,646,490

116,162

3,198

CMP (Rs)

 

 

 

2,346

 Upside (%)

 

 

 

36.3

Source: India Infoline Research

Warm Regards,

India Infoline Research Team


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