Nalanda Securities bullish on Reliance Industries has recommended buy rating on the stock with a target price of Rs 1434 in its research report dated October 22, 2018.
Nalanda Securities' research report on Reliance Industries
The company’s R&M revenue grew by 41.6% y-o-y & 3.3% q-o-q to INR 987600 million. EBIT declined by 19.6% y-o-y & increased marginally by 0.1% q-o-q to INR 53220 million. The segment was impacted by significantly higher crude price (up 47% Y-o-Y), tighter light-heavy differential and adverse movement in light distillate cracks on y-o-y basis and shutdown of Fluid Catalytic Cracking Unit (FCC). During Q2FY19, RIL Jamnagar refineries processed 17.7 MMT of crude. The average refinery utilization rates globally in Q2FY19 were 89.9% in North America, 85.2% in Europe and 88.4% in Asia. Refineries in the United States continue to benefit from the availability of cheap domestic crude supporting high utilization. Utilization in Asia too was high with refiners coming out of the peak maintenance season in Q1FY19 leading to higher utilization q-o-q.
Outlook
We value the company using SOTP valuation, thereby, valuing refining & petchem business at 7.5x FY20E EBITDA & telecom at 7x FY20E EBIDTA to arrive at a target price of INR 1434/share indicating 30.2% upside.
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