Joined: 13/Oct/2006
Location: India
Online Status: Offline
Posts: 3542
Posted: 04/Nov/2007 at 2:48pm
exxon posted poor results sighted high crude prices took its toll.as fuel prices slumped oil rose above 80 squeezing the gap between crude prices and gasoline robert sweet of horizon investment services said that high oil prices were a disaster for a co like exxon WITH LARGE REFINING BUSINESS because their raw material prices were incredibly high the pressure on profits could persist if oil remains incredibly high. exxon is the worlds largest oil co.
understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things
For an integrated player, the biggest problem has been reserve replenishment ratio which is dwindling. They are heavily dependent upon GoM and are scouting quite quite hard in canada. Also, the refginers are not keeping crude stocks at the desired level. So, when you buy spot you tend to pay a very high price. Also, cracks are not going up in the same fashion as crude so thats pinching as well. However, Exxon will be able to manage this and I find it very uncanny to trade exxon QoQ.
Joined: 19/Sep/2006
Location: United States
Online Status: Offline
Posts: 2296
Posted: 04/Nov/2007 at 8:27pm
How did RPL fare versus all domestic oil refining and marketing companies with regards to their valuations and capacities? This analysis throws up some interesting findings.
RPL has basically higher GRMs (Gross Refining Margins) compared to most other companies. Most of it is because of the latest machineries and technologies that RPL uses, produces estimates of about USD 15-18 per barrel of GRMs versus USD 6 of other companies.
A look at all the oil and marketing companies versus RPL will reveal what is in store. All these are 2010 estimates because RPL will go on-stream in 2010. So the analysis considered 2010 estimates.
The total revenue is close to about Rs 4,74,481 crore for all the oil and marketing companies put together versus Rs 21,908 crore for RPL - these are 2010 estimates.
PAT (profit after tax) for all the other oil and marketing companies is estimated to be close to about Rs 10,416 crore versus 2010 PAT of about Rs 7,424 crore for RPL. PAT is low for all these oil and marketing companies put together on those higher sales is because these companies have lower GRMs.
A look at the refining capacity reveals that RPL will have a refining capacity of close to about 28 million tonnes per annum versus the refining capacity of all the oil refining and marketing companies put together is about 117 million tonnes. That means that RPL has one-fifth the refining capacity of all the oil and marketing companies put together.
A look at the refining capacity reveals that RPL will have a refining capacity of close to about 28 million tonnes per annum versus the refining capacity of all the oil refining and marketing companies put together is about 117 million tonnes. That means that RPL has one-fifth the refining capacity of all the oil and marketing companies put together.
Having said that, MCap of all the oil and marketing companies is still lower than RPL. RPL's MCap is about Rs 120,000 crore versus Rs 100,000 crore of all these oil refining and marketing companies.
other estimates value other oil refining companies less aggressively than RPL. Why these companies are conservatively estimated is because of the subsidy burden, which these companies have. The marketing losses that PSUs and other companies have to take have also been considered.
At some point in time, these marketing companies will be profitable. So the lower estimates that have taken on PAT will increase aggressively. Having said, that analysts are not saying that RPL is expensive or the other oil and marketing companies are cheaper at this point in time. They are just giving a comparison between all the other oil refining and marketing companies versus RPL at this point in time.
RPL's EPS is close to about 16.5 in 2010 versus all the oil refining and marketing companies; it is close to about Rs 202. So one can imagine the difference over there, also price to earnings ratio of RPL in 2010 is estimated about 16.1 versus 9.6 - that is the average price to earnings ratio of 2010 of other oil refining and marketing companies.
These are just comparisons, analysts are not saying that one thing is cheaper than the other or one thing is more expensive than the other. These are just comparisons between other oil refining and marketing companies and RPL.
OIL COS FY10e
(Rs Cr) Revenue PAT
IOC 2.35 lk 5,205
BPCL 1.02 lk 1,601
HPCL 82,909 1,595
Bongaigaon 5,909 331
Chennai 21, 854 670
MRPL 26,191 1,014
Total 4.74 lk 10,416
OIL COS FY10e
(Rs Cr) Revenue PAT
RPL 51,908 7,424
OIL COS FY10e
(Rs) EPS
IOC 43.70
BPCL 44.30
HPCL 47.10
Bongaigaon 16.60
Chennai 45
MRPL 5.80
Total 202
OIL COS FY10e
(Rs) EPS
RPL 16.50
OIL COS MKT CAP
(Rs Cr)
IOC 55,650
BPCL 10,170
HPCL 8,050
Bongaigaon 1,376
Chennai 4,830
MRPL 13,901
Essar 5,851
Total 99,828
OIL COS MKT CAP
(Rs Cr)
RPL 120,802
OIL COS VALUATIONS
FY10e P/E
IOC 11x
BPCL 7.6x HPCL 5.0x
Bongaigaon 4.2x
Chennai 7.1x
MRPL 13.8x
Total 9.6x
RPL 16.1x
OIL COS CAPACITY
Refining mtpa
Total ex-RPL 148.97
IOC 60.2
HPCL 13.4
BPCL 22.3
Essar 10.4
ONGC+MRPL 10.4
REFINING CAPACITY
mtpa
RPL 28
ANALYSING RPL
-GRMs higher than most other companies
-Higher GRMS due to latest machineries, better technology
-GRM estimate of $15-17/bbl Vs $6/bbl for others
-RPL refining capacity of 28 mtpa Vs 117 mtpa for others
-Mkt cap of all other refining, mkt cos still lower than RPL
-Subsidy burden hits state run oil refininy companies
-Other oil refining cos have higher profits even after a/c for mktg losses
-RPL will start earning profits in FY2010
-RPL EPS then would be Rs 16.50 Vs Rs 202 of others put together
-FY10 total rev of oil refining cos seen at Rs 4.75 lk cr Vs Rs 21,908 cr of RPL
-FY10 total PAT of oil refining cos seen at Rs 10,416 cr Vs Rs 7,424 cr of RPL
Joined: 01/Nov/2007
Location: India
Online Status: Offline
Posts: 15
Posted: 05/Nov/2007 at 12:08pm
I have been thinking about this for a few weeks now. When I say Reliance, I mean only the core Petrochemicals and refining business.
If there something special about Reliance, what makes it so special and gives it a sustainable competitive edge:
1) Better refineries and petrochemical plants. If this is true, can someone tell me the reason (quantitative) to back this? Related to this, are the chemicals processes at Reliance refineries really cutting edge and are the engineers working at Reliance really really good? I have done my BTech (in Computer Science) from IIT Bombay. As far as I know, Reliance is not a big recruiter at IITs. Btw, I am not saying other engineering colleges cannot/donot produce good engineers. I know Reliance has its own chemical engineering college. Any idea how good is the education there?
2) Better execution skills/ business acumen of Ambanis
I am not aware of the technical aspects of a petrochemical plant or a refinery. However, if someone has any idea about these things, kindly share them.
Any other reason, why Relliance is so powerful? Vertical integration, location ......
Joined: 29/Mar/2007
Location: India
Online Status: Offline
Posts: 4243
Posted: 05/Nov/2007 at 12:30pm
- IIT Engineers neither design nor build the refineries. They are built by large foreign corporations, according to specifications. And to manage an existing refinery, I believe EXPERIENCE is worth more than an IIT/IIM degree.
- All refineries have a 'Nelson Complexity Factor' - in plainspeak, it is the capability of the refinery to process different varieties of crude. Higher (Nelson number) the better, but refineries with high complexities cost more. Needless to say, money is not in short supply for RPL/RIL.
- IOC/BPCL/HPCL also own refineries of varying complexity, but they hardly get any valuation because their products are sold in India (in a regulated environment) and are not exported.
- Better execution? Yes, it does help a bit when a mega-refinery is completed 6 months in advance.
- Regarding business acumen, just think for a moment why RIL has roped in Chevron for their RPL refinery. RIL didn't need the money. Thanks to the partnership, RIL has now got an assured partner/customer - Chevron - a company that will not only source crude, but will also take home the finished products (petrol/diesel etc). This ensures that RPL refinery will run at 100% capacity.
Joined: 19/Sep/2006
Location: United States
Online Status: Offline
Posts: 2296
Posted: 05/Nov/2007 at 4:34am
Topic: Reliance Petroleum Posted: Today at 1:41am By manishdave
I would sell RPL at this price without second thought.
Manishjee, you would recall this post when RPL will touch 1k by Dec 08..(I am not writing this because I am the shareholder of this stock, but its writing on the wall...
You cannot post new topics in this forum You cannot reply to topics in this forum You cannot delete your posts in this forum You cannot edit your posts in this forum You cannot create polls in this forum You cannot vote in polls in this forum
Active Topics
Memberlist
Calendar
Search
Help
Register
Login
IP Logged
