Dalal Street Investments

Goldman Sachs upgrades RIL to BUY

January 13, 2007

Goldman Sachs which has initiated coverage on India’s laregst company, Reliance Industries Ltd has upgraded it to BUY from Neutral with a 12 month price target of Rs 1660.

They value Reliance on sum-of-the parts methodology based on peak cycle valuation of 5.5X FY2008E (March) EBITDA for refining, near-peak cycle valuation of 6.0X FY2008E EBITDA for the petrochemical business, and DCF for the E&P and organized retail ventures to arrive at our target price of Rs1,660.

The sum of parts valuation of Reliance Industries’s individual business segments are valued as follows.

Chemicals – Rs 244
Refining – Rs 256
Investments – Rs 181
Reliance Petroleum Value – Rs 169
Reliance Retail – Rs 154
E&P Existing – Rs 61
E&P New – Rs 595

E&P probably means exploration and production.

Goldman expects fully diluted EPS of Rs79, Rs76 and Rs101 for FY07, 08 and 09 ending in March.

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