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Prabhudas Lilladher Report
We increase our FY23/24E earnings estimate of Reliance Industries Ltd. by 23%/13% as we increase our refining margin assumptions to $18/13/barrel of oil (up $6.5/1.5/bbl), while we increase our input price assumptions for petchem.
Low product inventory (U.S. diesel inventory lowest since CY08), reduced Chinese exports (May 22 diesel exports down 75% versus CY18-21 average) and low exports from Russia have pushed Q1 diesel margins to $42/bbl (Q4: $18) and gasoline margins to $34/bbl (Q4: 16).
RIL with access to discounted Russian crude (discount at over $30/bbl) and Europe exports is best placed to capitalise on tight market conditions, given high refining complexity.
We believe higher gas prices along with strong growth in telecom (continued tariff hikes) and retail (store expansion), make RIL a preferred play in challenging times.
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