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Raising RIL’s Target Price – Macquarie

October 14, 2007

Macquarie Research just a while ago upgraded the stock of Reliance Industries Ltd with a new target price of Rs 3,100. 20.8% Potential upside from current levels.

RIL plans to build one of the world’s largest cracker and petrochemicals complexes at Jamnagar. The proposed facility, with 2mtpa capacity, will be built at a capital cost of US$3bn and is expected to come on-stream by FY3/11.RIL has 4.4bn boe of 2P hydrocarbon reserves which are twice of that provided by partner in KGD6, Niko resources and compares with 1.5bn boe of 1P reserves stated in recently released annual report.

Sum of Parts Valuation of the company by Macquarie,

Core Business Rs 1161
IPCL Rs 70
Fuel Retailing Rs 85
E&P Business Rs 263
75% stake in Reliance Petroleum – Rs 386
Treasury Stock Rs 359
CBM-Sohagpur and NEC 25 Gas – Rs 198
Other E&P (D9, D3 and GS-01) Rs 119
Organised retail venture – Rs 165
2mtpa Ethylene Cracker – Rs 295

This is still very cheap as they have not factored in the vast Land Banks the company has been accumulating for its SEZ and Retail venture.

Coverage of Reliance Industries by Goldman Sachs, CLSA, Deutsche Bank

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