Driven by strong domestic demand growth for petro chemical, industry continues to expect stronger margins going forward. Disruption in production from Japan would also support petro chemical margins.
Refining strength to continue: Given a spate of closures of refineries in Japan & MENA, you can expect demand growth to outstrip net capacity additions in next foreseeable future, which would continue to support high GRM’s for complex refiners going forward.
Polyester margins to remain strong: Despite huge acreage expected under cotton cultivation in CY11, companies do not expect more than 30% correction in cotton prices, which would support polyester prices as polyester yarn is already at a 30% discount to cotton yarn prices.
BP deal offers valuation support: Despite concerns over rampup of KG-D6 production, RIL’s deal with BP offers indicative valuations for RIL’s E&P assets. Moreover, BP’s expertise in the deep-water space would aid in RIL’s endeavors to increase KG-D6 production levels and its aggressive exploration plans.
Maintain BUY with Target Price of Rs 1,155, indicating 12% upside from CMP of Rs 1,041.
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