[T.S.R:18389] BOAML Cuts Earnings Estimate For Reliance As Refining Margins Sink

RIL GRM down US$1.3-1.7/bbl WoW; Sing down US$1.3/bbl

RIL's theoretical GRM for the week ended February 17 at US$6.1-7.2/bbl is down

US$0.4/bbl WoW assuming its refinery operates as usual. However, shut down of

one CDU at its more complex new refinery would mean an additional hit of

US$1.0-1.3/bbl and GRM of US$4.83-6.19/bbl last week. Singapore GRM at

US$8.52/bbl last week is also down US$1.3/bbl WoW. The decline in GRM last

week is due to a fall in diesel, jet fuel and fuel oil cracks. RIL's GRM to date in 4Q

at US$6.09-7.19/bbl is US$2.0-3.1/bbl below Singapore GRM of US$9.23/bbl.

Shutdown at new refinery to hit RIL GRM by US$1-1.3/bbl

Half of RIL's new refinery was shut for planned maintenance on February 10. It is

to restart in the first week of March. The new refinery has a superior product slate

(more petrol instead of naphtha) than the old refinery. This will therefore shave off

US$1.0-1.3/bbl of RIL's GRM last week and US$0.14-0.19/bbl of its 4QTD GRM.

Diesel and jet fuel down WoW but still healthy

RIL's GRM last week was hit by US$1.5-2.2/bbl WoW fall in jet fuel and diesel

cracks (46% of its product slate). Jet fuel and diesel cracks are still healthy at

US$15.7-16.7/bbl. Singapore GRM was also hit by US$2.8/bbl WoW fall in fuel oil

(RIL does not produce) cracks. LPG and naphtha cracks were up US$0.1-0.9/bbl.

RIL's 4QTD GRM below Singapore GRM & down YoY

RIL's theoretical GRM in 4QTD at US$6.09-7.19/bbl is US$2.0-3.1/bbl below

Reuters' Singapore GRM of US$9.23/bbl. In 4QTD RIL's gain from QoQ product

cracks rise is US$2.4/bbl vis-à-vis US$2.5/bbl for Reuters' Singapore GRM. RIL is

also hit by lower discount to Dubai of crude it uses (down US$0.1-0.7/bbl QoQ).

Its 4QTD GRM is also down US$2.0-3.1/bbl YoY (US$9.2/bbl in 4Q FY11).

RIL's 4Q profit down 13-23% YoY at 4QTD GRM

RIL's 4Q profit works out to Rs41.5-46.6bn at 4QTD theoretical GRM of US$6.1-

7.2/bbl and blended petrochemical margin of US$429/t (down 21% YoY in rupee

terms). It would mean 13-23% YoY fall in 4Q profit (4Q FY11: Rs53.8bn).

Downside to RIL's FY13 EPS 6-15% if GRM at 4QTD level

If RIL's FY13 GRM is at 4QTD level of US$6.3-7.3/bbl, its FY13 earnings would

be 6-15% below our EPS estimate of Rs66.4 (assumes GRM of US$8/bbl).

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