CLSA expects RIL to double profits by 2016

MUMBAI: Prominent brokerage house CLSA expects Reliance Industries to double profits by 2016, as it expects speedy government approvals leading to reserve upgrades, rise in production and higher gas price, the company said in a recent report.

It also said, "while its ( RIL's) $12 billion downstream expansion is completed by FY16 leading to doubling of profits." "A combination of this growth, benign consensus expectations, below average valuations and buyback support makes us believe that the under-weight trade on Reliance is over," added CLSA.

"Production disappointment and material cut in reserves by partners at Reliance's flagship KGD6 block has weighed on the stock. Our analysis of disclosures by partners suggest likelihood of large reserve upgrades as integrated development plans for D6 and other blocks are approved over the next 12-18 months. These approvals will also pave the way for doubling of gas production from current levels to above 60mmscmd by FY17," said the company.

The company also said, "Reliance's $12bn downstream expansion will boost petchem capacity by 60% and bring much needed volume expansion after a three year hiatus. We are particularly enthused by coke gasification plant which promises to add $2.5/bbl to GRM and refinery off-gas cracker that will produce ethylene at one of the lowest costs (US$400/t) in the world. Full commissioning by FY16 will add $3.5bn to FY17 Ebitda even on our mid-cycle margin assumptions."