Maintain ‘Buy’ on RIL with target of Rs 1251:Edelweiss

MUMBAI: Edelweiss is bullish on Reliance Industries and looks at the recent correction in the stock as an opportunity for investors to make around 27 per cent gains in it.

“Reliance Industries’ Q3FY11 Rs 51.36 billion PAT was in line with our estimated Rs 51.87 billion. Higher EBIT (Q-o-Q) from refining (76.7% Y-o-Y, 11.1% Q-o-Q) and petrochemicals (+18.2% Y-o-Y and 10.6% Q-o-Q) offset lower EBIT from the E&P segment (KG-D6 Q3FY11 gas production at 55.8 mmscmd against 59.1 mmscmd in Q2FY11).

We believe the recent correction in the stock offers opportunity for investors to play the refining, polyester, and petrochemical upcycle. On the E&P front, while gas production may not scale up for the next 2-3 quarters, we are positive on the outcome and believe it may start scaling up FY13 onwards.

We have maintained our SOTP for the company at Rs 1251/share. At Rs 987, RIL offers 27% upside from the current level and the recent correction in the stock
could be a good entry point. Hence, we maintain ‘BUY/Sector Outperformer’ recommendation/rating on the stock.

At Rs 987, the stock is trading at 12.9x and 11.4x our FY12E and FY13E EPS, respectively,” the report said.