1. Well it will come as a surprise for many that Reliance may not be the stock which will be lapped by FIIs in near future as ABN Amro has issued a sell recommendation for stock with target price as Rs 1,150 and it has cut its price target projections by 38%. One can see that ABN Amro has given the new target price (Rs 1,150) by valuing it at 8 times FY10 estimated earnings for FY10.
2. ABN Amro is of the opinion that stock deserves lower valuations due to downgrading of the earnings by 6 per cent in FY09, 19 per cent in FY10 and 25 per cent in FY11 and one can anticipate a similar cut in estimated net profit though revenue targets are unchanged.
3. The slow down in growth prospects of Reliance stems from the fact that oil demand is receding world wide and thus reliance refining margins including Reliance Petroleum's yet-to-be commissioned refining capacity will be under stress. It is pertinent to note that Refining business is the biggest contributor to the Reliance revenues as it is contributing close to % and 50% of profit before interest and tax (PBIT).
5 Nov 2008
Reliance is not worth holding in Portfolio
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