RIL: 1035-1045 May Be A Big Hurdle Despite Better Than Expected Q1 Result; Actual GRM May Be 9.5$ (Without Inventory Gain Of 2$)

Trading Idea: RIL

CMP: 1012

Sell around 1035-1045 OR on rise around 1085-1095;

TGT: 992*-975-955-925*-909-885*-850-815 (1-3M)

TSL> 1055 OR > 1105

Note: Consecutive closing (3 days) above 1105-1115, RIL may further rally up to 1145*-1165-1190 & 1230-1275 in the near to long term (alternative bullish case scenario from the current trading level).

For RIL (Standalone):

Q1FY17 EPS: 23.20 (Expected: 20.05; QOQ: 22.60; YOY:19.50)

Q1FY17 TTM EPS: 88.40

FY-16 EPS: 84.70

Projected FY-17 EPS: 97

Average PE: 12

Present fair value may be around: 1060 (Q1FY17/TTM)

Projected fair value may be around: 1165 (FY-17/FWD)

Projected R-JIO impact on earnings and effect on per share: (-)250 (Approx as par some SOTP calculation at least for the initial years).

Projected fair value of RIL with R-JIO impact may be around: 915 (FY-17)

Some points about Q1 result of RIL:

1. Almost 34% of the PAT of RIL comes from treasury income, which may be one of the reason for the massive beat in EPS estimates.

2. EBITDA increased by a mere 0.84% sequentially (QOQ); but jumped by modest 16.22% on the back of better inventory management (gain) and corresponding jump in crude oil prices.

3. Reported GRM of 11.5$ includes inventory gain of 2$. Thus actual refining gain may be around 9.5$, which is as par market estimate.

4. Petrochem margin of 14.9% in Q1FY17 is inline with estimates (QOQ: 14%)

5. As par some reports, the current decline (June-July'16) of light-heavy crude spreads may be some headwinds for RIL GRM in the coming days and the present reported GRM of 11.5$ may not be sustained.

To be continued----

Analytical Charts:

Article Courtesy: http://frontiza.com/