Sunday, January 18, 2009

Reliance Petroleum CMP 79.60

About the company:-

RPL is a subsidiary of Reliance Industries Limited. RPL has set up a green-field petroleum refinery and polypropylene plant in a Special Economic Zone at Jamnagar in Gujarat, India. With an annual crude processing capacity of 580,000 barrels of oil per stream day (BPSD), RPL is the 6th largest refinery in the world.

RPL commenced its crude processing on 25th December 2008. The entire refinery complex is expected to attain full capacity shortly. The commissioning of the RPL refinery hurls Reliance into the league of the largest refiners globally, both in terms of complex refining capacity and earnings potential.

Competitive advantage:-

RPL refinery is one of the world's most complex refineries with a Nelson Complexity index of 14.0. This will enable the refinery to process heavy-crude varieties and produce superior quality products that meet stringent specifications, even beyond the forthcoming Euro IV norms. The high complexity will also present a significant competitive advantage in the current industry landscape of increasingly heavy and sour new crude discoveries. (Read more about Nelson Complexity Index

Location advantage:

RPL refinery is located adjacent to RIL's existing refinery and petrochemicals complex, which is amongst the largest and most efficient complex in the world. The RPL refinery is located on the west coast of India which is in close proximity to the Middle East, the largest crude oil producing region in the world. This is expected to result in lower ship turnaround time and reduced crude freight costs.

Promoter backing:

Reliance Industries ( holds 70% and Chevron ( holds 5% stake in the company (as on 31 Dec 2008). Chevron has its business in over 100 countries all over the world and is a leader in finding, producing and marketing oil and gas, as well as other energy products. Reliance Industries is India's largest private sector company on all financial parameters and ranks among top 150 in the world in terms of profits.

Export advantage:

RPL is structured as an export-oriented refinery. Its design capability to meet the tight product quality norms globally gives it a relative advantage in various sophisticated markets. Indian market is a regulated market and output has to be sold at a regulated price. Being export-oriented refinery could allow RPL to retain benefit of healthier spreads in medium-term. The RPL refinery also enjoys a tax holiday of 7 years enabling a higher net margin.

RPL project progress so far in pictures:-

Technically speaking:-

The stock is moving in a band of 69 to 95 and once it breaks out, it can quickly achieve 110-120 levels. Accumulate the stock for good gains in next 2-3 months.

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