Analysts' Picks: Reliance Industries
MERRILL Lynch has retained it ‘buy’ rating on Reliance Industries (RIL).
By ET Bureau |
MERRILL Lynch retains ���buy��� rating on Reliance Industries
RESEARCH: MERRILL LYNCH
RATING: BUY
CMP: Rs 1,127
MERRILL Lynch has retained it ���buy��� rating on Reliance Industries (RIL). Its refining margin has consistently been higher than the benchmark Singapore complex refining margin. Analyses suggests RIL���s superior refining margin is due to its ability to refine heavier crude than Dubai. Compared to the last refining downturn, RIL is set to benefit more in FY10-FY 11E from its ability to refine heavier crude. Reliance Petroleum���s (RPL) refinery, which is expected to start operations soon, can process even heavier crude than RIL and has a superior product slate. The average discount of Arab heavy to Dubai since FY01 is $2.4/bbl. The discount has sustained at over $5/bbl even in the past six weeks, despite the slump in oil prices. Merrill Lynch estimates RPL���s refining margin at $12.9/bbl if it were to operate in Q3 FY09, vis-��-vis Singapore margin of $7.3/bbl. It will produce more gasoline than RIL. Gasoline cracks have always been at a premium to naphtha and LPG cracks. Merrill Lynch feels that a weakening in diesel and gasoline cracks is the main risk to RPL attaining such high margins when it begins operations.
RESEARCH: MERRILL LYNCH
RATING: BUY
CMP: Rs 1,127
MERRILL Lynch has retained it ���buy��� rating on Reliance Industries (RIL). Its refining margin has consistently been higher than the benchmark Singapore complex refining margin. Analyses suggests RIL���s superior refining margin is due to its ability to refine heavier crude than Dubai. Compared to the last refining downturn, RIL is set to benefit more in FY10-FY 11E from its ability to refine heavier crude. Reliance Petroleum���s (RPL) refinery, which is expected to start operations soon, can process even heavier crude than RIL and has a superior product slate. The average discount of Arab heavy to Dubai since FY01 is $2.4/bbl. The discount has sustained at over $5/bbl even in the past six weeks, despite the slump in oil prices. Merrill Lynch estimates RPL���s refining margin at $12.9/bbl if it were to operate in Q3 FY09, vis-��-vis Singapore margin of $7.3/bbl. It will produce more gasoline than RIL. Gasoline cracks have always been at a premium to naphtha and LPG cracks. Merrill Lynch feels that a weakening in diesel and gasoline cracks is the main risk to RPL attaining such high margins when it begins operations.
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