Stock Recommendations:: Reliance Industries

Q4FY08 EBITDA (standalone) at Rs60.19b was up 16.4% yoy, while net profit at Rs39.12b was up 24% yoy. Operating profits were ahead of our expectation of Rs 58.3bn because of high PP spread over propylene that more than compensated for lower than expected GRM’s, net profits were in line with our expectation of Rs 38.99 bn. Key contributors to yoy growth were higher refining margins, lower tax rate and realization as well as volume growth at PMT. Extension of RIL’s existing tax benefits to IPCL production has led to accelerated booking of the benefits leading to lower rates. With atleast 6 discoveries under appraisal (two more discoveries over the last three weeks) out of 17 discoveries pending appraisal, a portfolio of highly prospective exploration blocks, superior petrochem and refining margins and a highly competitive off-gas based petrochem complex on the anvil, we believe, risk-reward has turned favourable and presents a well diversified growth opportunity. We maintain outperform, with a base case target price of Rs3025/share. RIL is now our top pick in the oil and gas / Petrochem space.