KRChoksey is bullish on Reliance Industries and has recommended accumulate rating on the stock with a target of Rs 800 in its June 25, 2012 research report.
Reliance Industries, recently Niko resources have cut 2p reserve estimates from the KG D6 block by 80% from 9.3tcf to 1.9tcf. This is impacting current valuation of KG-D6 block Rs 20/share based on the gas rate of $4.2/mmbtu, on positive note NIko mentioned probability of significant upside of 6.1tcf from contingent resource discoveries at D6, NEC 25 and satellite fields. At the same time RIL, Partner to invest $4bn to develop satellite fields which will improve gas production from KG block.
AGM note suggested Reliance Industries hopes to produce an additional 30 mmscmd of gas at its KG D6 field off India's East coast. This will improve Oil & Gas segment EBIT by 20% and overall positive impact on EBIT would be 5%. We rule out any possibility of RIL gas production fall below 25mmscmd and we do not agree with Niko guidance on production from KG block. Press reports suggest EGoM is considering KG D6 gas price hike before April 2014. KG D6 gas price hike to $8-9/mmbtu would make up for lower reserves, Gas prices in nearby countries like Thailand and China at $6- 7.5/mmbtu are higher than $4.2/mmbtu in India. we believe this is strong case of gas price hike from current level to $8/mmbtu ( considering market rate & cost of production), any price hike impact on reserve revaluation will offset reserve downgrade.
We believe in improvement of GRM; expect pickup in regional margins in 2H CY12. Any gradual recovery in downstream demand and improvement in global operating rates would be a positive trigger for petchem. We recommend Accumulate on RIL with price objective of Rs 800/share, says KRChoksey research report.
FIIs holding more than 30% in Indian cos
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