RIL shares fall by 3.6% after co reports decline in profit

MUMBAI: Shares of Reliance Industries (RIL) fell 3.6% to Rs 1,931.25 on Friday, after the company posted a decline in profit for the fourth straight quarter in July-September. Though the quarter earnings met estimates, fall in refining margins and reduced exports ruffled investors, who are already disappointed about its first exploration well in the KG D9 block turning out to be dry, and concerned about its extended conflict with RNRL.

The RIL stock had underperformed the market over the past month, falling 12.2% as compared to the 7% decline in the Sensex. "After the dry well in KG D9, investors may less aggressively value exploration upside in RIL," said Bank of America Merrill Lynch, in a report, while reiterating its underperformed rating on the stock. The investment bank has assigned a price target of Rs 1,788 on the stock.

Last week, RIL said it abandoned its first exploratory well during its first drilling in the D-9 block, as it found it dry. This is part of a four-well drilling programme undertaken by RIL and its partner in the block, Hardy Oil. RIL has clarified that it will continue drilling the other three wells.

Kotak Securities has asked its clients to sell RIL, assigning a target price of Rs 1,750. "We continue to find RIL stock expensive in light of weaker (chemical) and refining margins and the RIL-RNRL legal dispute. The current stock price is already factoring in about $13 billion of implied value for new E&P (exploration and production)
discoveries," said analysts from Kotak Securities.

Citigroup has hit the middle path, asking investor to hold on to Reliance Industries. The brokerage is expecting some more "constructive views" on settlement of gas dispute, probable improvement in refining margins and correction in stock prices.

The brokerage has set an upside target of Rs 2,200 for the refiner. Investment bank Goldman Sachs has asked its clients to buy Reliance, as it is likely to perform well in the upcoming quarters. "RIL���s earnings appear to have bottomed out in the first quarter and are likely to show strong growth going forward from stabilization and ramp-up of new projects," the Goldman Sachs analysts Nilesh Banerjee and Nishant Baranwal in a note to their clients.

According to Goldman Sachs analysts, excess cash flow to the tune of $20 billion after RIL���s committed capex will help the company pursue inorganic growth in its businesses. The foreign bank has assigned a ���buy��� on the stock with a target price of Rs 2,620.