INDIA

16 July 2012

Oil & Gas

Q1FY13 Results Preview

Crude gives, rupee takes

Amidst the EU turmoil, crude prices crashed from a high of US$125/bbl to about US$90/bbl and averaged US$109/bbl during Q1. Falling crude prices was good news from the Indian perspective but 7.5% QoQ rupee depreciation negated the positive impact of lower crude prices. GRMs did not receive any fillip from falling crude prices and declined further from US$7.7/bbl in Q4 to US$6.7/bbl in Q1. Despite lower crude prices, Q1 under-recoveries still remained high at Rs445bn owing to rupee depreciation. Government raised petrol prices during Q1 but the decision on diesel (possibly LPG) price hike is pending and is expected only post presidential elections. Devoid of government support in Q1, OMCs will report losses, but upstream will report relatively better performance. Gas utilities are likely to be a mixed bag. Cairn is likely to benefit from rupee and forex gains while RILs petchem and refining performance will be better on a QoQ basis. Crude declines and averages at US$109/bbl: EU turmoil along with weaker gasoline demand in the US and rising crude stockpiles led to a free fall in crude prices from a high of about US$125/bbl to US$90/bbl during Q1. Crude thus averaged US$109/bbl while currently hovering around US$100/bbl. Lower gasoline and naphtha cracks impact GRMs: Lower gasoline demand in the US led to gasoline cracks falling to single digit from mid-teens. Simultaneously, lower petchem demand from China and higher availability from the Middle-East sent naphtha prices plummeting. Hence, despite widening lightheavy and sweet-sour differentials, GRMs declined sequentially. Reuters Singapore Complex GRMs thus averaged lower QoQ at US$6.7/bbl in Q1 compared to US$7.7/bbl in Q4FY12. Under-recoveries still remain high at Rs445bn: Rupee played a spoil sport amidst lower crude prices thus keeping underrecoveries high at Rs445bn. OMCs in red, upstream to fare better: Devoid of government compensation, OMCs are likely to report losses. ONGC and OIL are expected to report better numbers due to higher net realisation and favourable exchange rate but the statutory duties are likely to rise owing to higher cess (from Rs2,500/ton to Rs4,500/ton). Decline in gas demand is likely to affect Petronet, GAIL and Gujarat Gas while lower domestic availability is likely to affect GSPL. Though IGL is likely to report volume growth, it would be under pressure due to rupee depreciation. Cairn is likely to benefit from favourable exchange rate both from crude realisations and from forex gains. RILs refining and petchem segments are expected to benefit from rupee depreciation while E&P still remains a dampener. We remain positive on Cairn owing to high crude prices and the likely ramp-up in crude production and on Petronet LNG due to favourable domestic demand amidst lowering spot LNG prices and increasing availability.
Net Sales Y/E Mar (Rsmn) Q1FY13E YoY (%) QoQ (%) FY13E Q1FY13E BPCL 532,506 15.4 (17.7) 2,287,332 (30,020) Cairn India Ltd 41,115 203,402 30,936 10.7 12.6 GAIL India Ltd 113,493 348,407 15,113 27.7 8.2 Gujarat Gas Co Ltd 7,195 32,307 997 23.0 (0.6) Gujarat State Petronet Ltd 2,736 10,297 2,499 (4.9) (1.8) HPCL 529,709 (32,573) 29.5 1.0 2,042,785 Indian Oil Corp Ltd 1,329,745 (47,877) 31.3 3.5 4,832,307 Indraprastha Gas Ltd 7,530 34,742 1,605 40.1 4.4 Oil & Natural Gas Corp Ltd 185,127 105,850 12.9 (4.3) 1,511,846 Oil India Ltd 26,938 13.8 49.5 89,046 13,538 Petronet LNG Ltd 66,810 230,869 4,261 44.5 4.8 Reliance Industries Ltd 970,518 19.8 13.9 3,683,496 72,038 Source: Company, Centrum Research Estimates; Gujarat Gas quarterly numbers for Q2CY12E EBITDA YoY (%) 38.7 (2.0) (4.2) (28.9) (5.8) 26.8 157.2 1.4 11.8 9.1 (2.7) (27.4) QoQ (%) 14.6 96.9 30.4 (1.8) (4.6) (8.6) 139.7 0.7 9.8 40,616 122,007 47,492 4,479 9,325 39,531 195,790 6,794 487,807 46,197 18,530 321,129

Price Performance (%)* BPCL CAIRN GAIL GGAS GSPL HPCL IGL IOCL OIL ONGC PLNG RIL Nifty Index 1M 5.6 (1.8) 7.6 0.6 6.5 16.2 0.4 10.4 5.1 6.1 9.0 0.3 2.1 6M 52.0 (5.9) (2.7) (19.1) (11.4) 38.0 (30.6) 1.5 4.7 9.8 (5.5) (1.8) 7.4 1Yr 15.6 0.1 (21.7) (21.1) (31.4) (12.8) (38.4) (20.7) (6.4) (0.6) 2.5 (17.0) (6.4)

*as on 13 July 2012 Source: Bloomberg, Centrum Research

Rohit Nagraj rohit.nagraj@centrum.co.in +91 22 4215 9854

Summary Estimates
EBITDA (%) FY13E Q1FY13E Q1FY12 (5.6) 75.2 13.3 13.9 91.3 (6.1) (3.6) 21.3 57.2 50.3 6.4 7.4 (4.7) 85.0 17.7 24.0 92.2 (6.3) (1.8) 29.5 57.7 52.5 9.5 12.3 (35,870) 29,234 9,002 662 1,256 (40,123) (64,277) 735 50,238 9,168 2,479 43,224 PAT Q1FY13E YoY (%) QoQ (%) 40.0 7.2 (8.6) (31.2) (8.6) 30.3 72.8 (8.2) 22.7 7.9 (3.5) (23.6) FY13E - 10,960 33.7 77,909 86.2 34,946 2,908 2.0 4,271 (2.9) 8,048 - 75,803 3,278 (8.1) (11.0) 208,187 106.1 22,261 9,908 1.1 2.0 211,288

Please refer to important disclosures/disclaimers in Appendix A

Centrum Equity Research is available on Bloomberg, Thomson Reuters and FactSet

Crude softens to US$100/bbl

Exhibit 1: Brent Crude prices
(US$/bbl) 160 140 120 100 80 60 40 20 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Oct-07 Oct-08 Oct-09 Oct-10 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Oct-11 Jan-12 Apr-12 Jul-12

Exhibit 2: OPEC crude basket

(USD/ bbl) 160 140 120 100 80 60 40 20 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12
Apr-12

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Oct-07

Oct-08

Oct-09

Oct-10

Brent

Quarterly avg.

OPEC Crude Basket

Quarterly Average

Source: Bloomberg, Centrum Research

Source: Bloomberg, Centrum Research

Exhibit 3: Indian crude basket

(US$/bbl) 160 140 120 100 80 60 40 20 Jul-08 Jul-09 Jul-10 Jul-11 Oct-09 Oct-10 Oct-11 Jul-07 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Oct-07 Oct-08 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jul-12

Exhibit 4: OPEC and Non-OPEC crude production

(mbpd) 55 40 51.3

Oct-11

Jan-12

50

31.6 35

45

40 Jan-11 Apr-08 Apr-09 Apr-10 Apr-11 Oct-08 Oct-09 Oct-10 Oct-11 Jan-08 Jan-09 Jan-10 Jan-12 Jul-08 Jul-09 Jul-10 Jul-11

Indian crude oil basket

Quarterly avg.

Non OPEC Production(LHS)

OPEC Crude Production(RHS)

Source: Bloomberg, Centrum Research

Source: Bloomberg, Centrum Research

Oil & Gas

Jul-12
30 25

GRMs decline to US$6.7/bbl due to weak gasoline and naphtha cracks

Exhibit 5: Reuters Singapore Complex GRMs
(US$/bbl) 18

16 14 12 10 8 6 4 2 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Jan-11 Jan-10 Jan-09 Jan-08 Jan-07 Jan-12
Apr-11

Jul-07

Jul-08

Singapore GRMs

Jul-09

Qtrly. Avg.

Source: Reuters, Centrum Research

Exhibit 6: Petroleum product prices

(US$/ bbl) 180 160 140 120 100 80 60 40 20 0 Jul-08 Jul-09 Jul-10 Jan-08 Jul-11 Jan-09 Jan-10 Oct-08 Jan-11 Apr-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Jan-12 Apr-12 Jul-12

Exhibit 7: Petroleum product crack spreads

(US$/ bbl) 50 40 30 20 10 0 -10 -20 -30 -40 Apr-08 Apr-09 Apr-10 Apr-12 Oct-08 Jan-08 Oct-09 Jan-09 Oct-10 Jan-10 Oct-11 Jan-11 Jan-12 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12

Gasoline - Crude Spread Fuel Oil - Crude Spread

Jul-10

Diesel - Crude Spread Naphtha - Crude Spread

Jul-11

(2)

Jet Kerosene - Crude Spread

Gasoline

Diesel

Jet Kerosene

Fuel Oil

Naphtha

Source: Bloomberg, Centrum Research

Source: Bloomberg, Centrum Research

Light-heavy and sweet-sour differentials expand

Exhibit 8: Arab light-heavy spread
(US$/ bbl) 16 14 12 10 8 6 4 2 0 Apr-07 Apr-08 Apr-09 Jan-07 Apr-10 Jul-07 Jan-08 Apr-11 Jul-08 Jan-09 Apr-12 Oct-07 Jul-09 Jan-10 Oct-08 Jul-10 Jan-11 Oct-09 Jul-11 Jan-12 Oct-10 Oct-11 Jul-12

Arab Light-Heavy Differential

Source: Bloomberg, Centrum Research

Qtrly. Avg.

Oil & Gas

Exhibit 9: WTI-WTS sweet-sour spread

(US$/ bbl) 12 10 8 6 4 2 0 -2 Oct-07 Oct-08 Oct-09 Oct-10 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Oct-11 Apr-12
Apr-12

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

WTI-WTS Sweet-Sour Differential

Qtrly. Avg.

Source: Bloomberg, Centrum Research

Petchem margins expand owing to decline in naphtha prices

Exhibit 10: Petchem product prices
(US$/ton) 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Jan-11 Jan-08 Jan-09 Jan-10 Apr-08 Apr-09 Apr-10 Apr-11 Oct-08 Oct-09 Oct-10 Oct-11 Jan-12 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12

Naphtha

HDPE

LDPE

PP

PVC

Source: Bloomberg, Centrum Research

Exhibit 11: Petchem product spreads

(US$/ton) 1,000 800 600 400 200 0 -200 Oct-10 Oct-11 Jan-10 Jan-11 Jan-12 Jul-09 Jul-10 Jul-11 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Oct-08 Oct-09 Jan-08 Jan-09 Jul-08 Jul-12

HDPE-Naphtha
Source: Bloomberg, Centrum Research

PP-Naphtha

LDPE-Naphtha

PP-Propylene

Jul-12

Oil & Gas

Despite lower crude prices, rupee depreciation keeps Q1 underrecoveries high at about Rs450bn
Exhibit 12: Subsidy sharing
(%) 100 80 60 40 20 0 FY07 FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E Upstream
Source: Company, Centrum Research Estimates

10

21 69 46

12

0 15 60

49

60

56

45

56

59

42

33

32

32

39

40

40

38

33

Oil bonds/ cash

Absorption

Exhibit 13: Total under-recoveries

(Rsbn) 1,600 1,385 1,400 1,200 1,000 800 600 400 200 0 FY08 FY09 FY10 FY11 FY12 Q1FY13E 771 461 782 445 1,033

Source: Company, Centrum Research Estimates

Oil & Gas

BPCL (Rating Buy; Target Price Rs452)

Exhibit 14: Q1FY13 Estimates
BPCL Sales (Rsmn) EBITDA(Rsmn) EBITDA (%) PAT(Rsmn) PAT (%) EPS Crude throughput (mmt) Market sales (mmt) Upstream Subsidies( Rsmn) Source: Company, Centrum Research Estimates Q1FY13E 532,506 (30,020) (5.6) (35,870) (6.7) (99.2) 5.6 7.6 35,025 Q1FY12 461,396 (21,642) (4.7) (25,619) (5.5) (70.9) 5.2 7.8 34,091 7.7 (2.9) 2.7 YoY (%) 15.4 Q4FY12 646,689 50,838 7.9 39,628 6.1 109.6 6.0 8.2 43,337 (6.7) (7.7) (19.2) QoQ (%) (17.7) -

Cairn India (Rating Buy; Target Price Rs390)

Post government approval in April, Cairn raised its Mangala output from 125,000bpd to 150,000bpd. With incremental production from Mangala, the cumulative output has reached 175,000bpd while the average output during Q1 is expected at 167,000bpd. Crude prices averaged lower during the quarter but rupee depreciation is likely to benefit Cairns revenues and earnings. However, higher cess payment would inflate the statutory levies. Exhibit 15: Q1FY13 Estimates
CAIRN Sales(Rsmn) EBITDA(Rsmn) EBITDA (%) PAT(Rsmn) PAT (%) EPS MBA net production(bpd) MBA Crude Realisation(US$/bbl) Source: Company, Centrum Research Estimates Q1FY13E 41,115 30,936 75.2 29,234 61.9 15.4 167,000 98.1 Q1FY12 37,127 31,553 85.0 27,266 72.4 14.3 125,127 104.5 33.5 (6.1) 7.2 YoY (%) 10.7 (2.0) Q4FY12 36,513 26,994 73.9 21,862 58.4 11.5 137,634 96.2 21.3 2.0 33.7 QoQ (%) 12.6 14.6

Oil & Gas

GAIL (Rating Neutral; Target Price Rs373)

GAILs gas transmission volumes are expected to remain flattish at 116mmscmd during Q1. Sequential decline in subsidy sharing at Rs8.9bn (Rs14.0bn in Q4FY12) would benefit GAILs performance. Though Petchem prices were stable in dollar terms; rupee depreciation will benefit Petchem segment performance. Exhibit 16: Q1FY13 Estimates
GAIL Sales(Rsmn) EBITDA(Rsmn) EBITDA (%) PAT(Rsmn) PAT (%) EPS Nat. gas trans. (mmscmd) LPG Transmission (TMT) Petchem, LPG etc. (TMT) Nat. gas trans. EBITDA LPG Transmission EBITDA Petchem EBITDA Nat. gas trading EBITDA Subsidy sharing Source: Company, Centrum Research Estimates Q1FY13E 113,493 15,113 13.3 9,002 7.9 7.1 116.0 880.0 390 4,750 715 7,965 2,580 8,943 Q1FY12 88,890 15,772 17.7 9,847 11.0 7.8 117.2 817.0 356 7,550 810 2,860 3,130 6,819 (1.0) 7.7 9.6 (37.1) (11.7) 178.5 (17.6) 31.1 (8.6) YoY (%) 27.7 (4.2) Q4FY12 104,884 7,677 7.3 4,833 4.5 3.8 115.6 879.0 393 4,550 680 4,760 1,680 13,980 0.3 0.1 (0.8) 4.4 5.1 67.3 53.6 (36.0) 86.2 QoQ (%) 8.2 96.9

Gujarat State Petronet (Rating Neutral; Target Price Rs74)

Further decline in RIL KG D6 volumes would impact GSPLs transmission volumes marginally and is expected to average at 30.5mmscmd. Transmission tariffs are expected to remain high above Rs900/000scm due to the take-or-pay component. Exhibit 17: Q1FY13 Estimates
GSPL Sales(Rsmn) EBITDA(Rsmn) EBITDA (%) PAT(Rsmn) PAT (%) EPS Trans. volumes (mmscmd) Avg. trans.Tariff (Rs/ 000scm) Source: Company, Centrum Research Estimates Q1FY13E 2,736 2,499 91.3 1,256 43.7 2.2 30.5 950.0 Q1FY12 2,876 2,652 92.2 1,374 46.5 2.4 36.8 813.1 (17.0) 16.8 (8.6) YoY (%) (4.9) (5.8) Q4FY12 2,788 2,544 91.3 1,293 44.1 2.3 31.1 956.3 (1.9) (0.7) (2.9) QoQ (%) (1.8) (1.8)

Oil & Gas

Gujarat Gas (Rating Sell; Target Price Rs277)

Demand decline is expected to lead to sequential decline in distribution volumes at 3.1mmscmd. Average realisations are likely to go up due to price hike in the industrial retail segment. Gas sourcing cost is likely to jump due to rupee depreciation thus impacting operating margins and earnings. Exhibit 18: Q1FY13 Estimates
Gujarat Gas Sales(Rsmn) EBITDA(Rsmn) EBITDA (%) PAT(Rsmn) PAT (%) EPS Gas sales (mmscmd) Avg. dist. Rate (Rs/scm) Source: Company, Centrum Research Estimates Q1FY13E 7,195 997 13.9 662 9.1 5.1 3.1 25.0 Q1FY12 5,852 1,403 24.0 963 16.1 7.5 3.3 19.1 (6.0) 30.9 (31.2) YoY (%) 23.0 (28.9) Q4FY12 7,240 765 10.6 649 8.6 5.0 3.3 23.5 (6.6) 6.4 2.0 QoQ (%) (0.6) 30.4

HPCL (Rating Neutral; Target Price Rs351)

Exhibit 19: Q1FY13 Estimates
HPCL Sales(Rsmn) EBITDA(Rsmn) EBITDA (%) PAT(Rsmn) PAT (%) EPS Crude throughput (mmt) Market sales (mmt) Upstream Subsidies(Rsmn) Source: Company, Centrum Research Estimates Q1FY13E 529,709 (32,573) (6.1) (40,123) (7.6) (118.5) 4.0 7.3 32,790 Q1FY12 409,169 (25,684) (6.3) (30,803) (7.5) (91.0) 4.0 7.3 31,668 0.8 (0.3) 3.5 YoY (%) 29.5 Q4FY12 524,431 55,162 10.5 46,310 8.8 136.8 4.0 7.7 40,000 1.0 (6.2) (18.0) QoQ (%) 1.0 -

Oil & Gas

Indraprastha Gas (Rating Under review)

Benefit of CNG price hike affected in Q4FY12 would benefit IGL in Q1, but rupee depreciation is likely to take away the entire benefit and impact margins. CNG volumes are likely to be flattish QoQ but PNG volumes are likely to remain buoyant. Exhibit 20: Q1FY13 Estimates
IGL Sales(Rsmn) EBITDA(Rsmn) EBITDA (%) PAT(Rsmn) PAT (%) EPS CNG (mn kgs) PNG (mmscm) CNG (Rs/ kg) PNG (Rs/ scm) Source: Company, Centrum Research Estimates Q1FY13E 7,530 1,605 21.3 735 9.7 5.3 181 80.3 35.5 24.0 Q1FY12 5,374 1,583 29.5 801 14.9 5.7 161 64.8 29.1 19.6 12.2 24.0 22.0 22.5 (8.2) YoY (%) 40.1 1.4 Q4FY12 7,212 1,683 23.3 800 11.1 5.7 180 78.0 34.0 23.8 0.6 3.0 4.3 0.6 (8.1) QoQ (%) 4.4 (4.6)

IOCL (Rating Neutral; Target Price Rs270)

Exhibit 21: Q1FY13 Estimates
IOCL Sales(Rsmn) EBITDA(Rsmn) EBITDA (%) PAT(Rsmn) PAT (%) EPS Crude throughput (mmt) Market sales (mmt) Upstream Subsidies(Rsmn) Source: Company, Centrum Research Estimates Q1FY13E 1,329,745 (47,877) (3.6) (64,277) (4.8) (26.5) 14.2 19.2 81,229 Q1FY12 1,012,845 (18,618) (1.8) (37,187) (4.0) (15.3) 14.3 19.3 79,323 (0.7) (0.3) 2.4 YoY (%) 31.3 Q4FY12 1,284,440 147,487 11.5 126,704 9.8 52.2 14.1 19.4 94,301 0.7 (1.1) (13.9) QoQ (%) 3.5 -

Oil & Gas

ONGC (Rating Buy; Target Price Rs313)

Although we factor in upstream sharing at 40% in FY13E, sharing in Q1 is likely to remain at 33.5% thus keeping net realisations at US$47.4/bbl. Statutory levies are expected to go up due to the increase in cess from Rs2,500/ton earlier to Rs4,500/ton. Exhibit 22: Q1FY13 Estimates
ONGC Sales(Rsmn) EBITDA(Rsmn) EBITDA (%) PAT(Rsmn) PAT (%) EPS Crude Sales(MMT) Gas Sales(BCM) Crude Gross Realisation(US$/bbl) Crude Net Realisation(US$/bbl) Subsidy Sharing Source: Company, Centrum Research Estimates Q1FY13E 185,127 105,850 57.2 50,238 25.3 5.9 5.59 0.44 112.0 47.4 120,460 Q1FY12 164,013 94,700 57.7 40,949 24.2 4.8 5.69 0.50 121.3 48.8 120,460 (1.7) (11.8) (7.7) (2.8) 22.7 YoY (%) 12.9 11.8 Q4FY12 193,392 115,771 59.9 56,444 28.5 6.6 6.49 0.48 121.6 44.3 141,700 (13.9) (7.5) (7.9) 6.9 (15.0) (11.0) QoQ (%) (4.3) (8.6)

Oil India (Rating Buy; Target Price Rs568)

Although we factor in upstream sharing at 40% in FY13E, sharing in Q1 is likely to remain at 33.5% thus keeping net realisations at US$56.0/bbl. Statutory levies are expected to go up due to the increase in cess from Rs2,500/ton earlier to Rs4,500/ton. Exhibit 23: Q1FY13 Estimates
Oil India Sales(Rsmn) EBITDA(Rsmn) EBITDA (%) PAT(Rsmn) PAT (%) EPS Crude Sales(MMT) Gas Sales(BCM) Crude Gross Realisation(US$/bbl) Crude Net Realisation(US$/bbl) Subsidy Sharing Source: Company, Centrum Research Estimates Q1FY13E 26,938 13,538 50.3 9,168 30.5 38.1 0.96 0.68 110.5 56.0 17,807 Q1FY12 23,661 12,412 52.5 8,496 31.8 35.3 0.97 0.64 116.3 59.6 17,807 (0.7) 6.1 (5.0) (5.9) 7.9 YoY (%) 13.8 9.1 Q4FY12 18,021 5,647 31.3 4,448 20.8 18.5 0.97 0.64 119.7 38.9 28,737 (1.0) 6.4 (7.7) 43.9 (38.0) 106.1 QoQ (%) 49.5 139.7

10

Oil & Gas

Petronet LNG (Rating Buy; Target Price Rs177)

PLNGs re-gasification volumes are expected to improve QoQ due to demand revival in May and June. Lower margins on spot LNG is likely to keep blended re-gasification margins lower at Rs36.0/mmbtu against Rs36.7/mmbtu in Q4FY12. Exhibit 24: Q1FY13 Estimates
Petronet Sales(Rsmn) EBITDA(Rsmn) EBITDA (%) PAT(Rsmn) PAT (%) EPS Regasification vol. (TBTUs) Blended regas. Margins(Rs/mmbtu) EBITDA/Ton(Rs) Contracted LNG (TBTUs) Spot LNG (TBTUs) Source: Company, Centrum Research Estimates Q1FY13E 66,810 4,261 6.4 2,479 3.7 3.3 139.0 36.0 1,563 119.0 20.0 Q1FY12 46,233 4,381 9.5 2,568 5.5 3.4 133.4 36.8 1,675 114.7 18.7 4.2 -1.9 (6.7) 3.8 6.8 (3.5) YoY (%) 44.5 (2.7) Q4FY12 63,754 4,230 6.6 2,451 3.8 3.3 134.5 36.7 1,604 119.5 15.0 3.3 (1.8) (2.5) (0.4) 33.3 1.1 QoQ (%) 4.8 0.7

Reliance Industries (Rating Buy; Target Price Rs819)

Although crude prices declined in Q1, GRMs declined primarily due to pressure on gasoline and naphtha prices. Benchmark Singapore Complex GRMs contracted to US$6.7/bbl during Q1 from US$7.7/bbl in Q4FY12. RIL is expected to report better than benchmark GRMs due to widening of sweet-sour and light-heavy differentials. Petchem performance is likely to be better QoQ primarily due to rupee depreciation. RILs KG D6 gas production further declined during the quarter and is likely to average 32mmscmd. RILs interest burden is likely to go up QoQ due to rupee depreciation. Exhibit 25: Q1FY13 Estimates
RIL Sales(Rsmn) EBITDA(Rsmn) EBITDA (%) PAT(Rsmn) PAT (%) EPS GRMs (US$/bbl) Crude Throughput KG D6 gas production (mmscmd) Refining EBIT(Rsmn) Petchem EBIT(Rsmn) E&P EBIT(Rsmn) Source: Company, Centrum Research Estimates Q1FY13E 970,518 72,038 7.4 43,224 4.4 13.2 7.0 17.0 32.0 18,484 24,036 10,631 Q1FY12 810,180 99,260 12.3 56,610 6.9 17.3 10.3 17.0 48.0 31,990 22,150 14,730 (32.0) (33.3) (42.2) 8.5 (27.8) (23.6) YoY (%) 19.8 (27.4) Q4FY12 851,820 65,630 7.7 42,360 4.8 13.0 7.6 16.3 35.5 16,960 21,740 9,510 (7.9) 4.3 (9.9) 9.0 10.6 11.8 2.0 QoQ (%) 13.9 9.8

11

Oil & Gas

Exhibit 26: Sector valuation snapshot

Rating# CMP (Rs) BPCL Cairn India Ltd GAIL India Ltd Gujarat Gas Co Ltd Gujarat State Petronet Ltd HPCL Indraprastha Gas Ltd Indian Oil Corp Ltd Oil India Ltd Oil & Natural Gas Corp Ltd Petronet LNG Ltd Reliance Industries Ltd Buy Buy Neutral Sell Neutral Neutral Under review Neutral Buy Buy Buy 387 316 363 313 71 350 243 271 481 285 148 719 Target Price 452 390 373 277 74 351 270 568 313 177 819 Upside/ Downside (%) 16.8 23.4 2.7 (11.5) 3.8 0.2 (0.5) 18.0 9.8 19.6 14.0 P/BV (x) 0.9 1.1 1.9 3.9 1.5 4.7 0.0 1.1 1.6 1.7 2.6 1.3 PE (x) 12.8 8.1 13.2 15.2 6.4 4.7 10.4 8.7 13.0 7.7 11.2 11.0 EV/E (x) 11.5 4.6 9.5 9.1 5.3 9.1 6.8 5.7 3.4 4.5 6.3 8.9 EPS (Rs) 30.3 38.8 27.5 20.6 11.1 75.3 23.4 31.2 37.0 37.1 13.2 65.2 ROE (%) RoCE (%) 7.2 14.3 15.3 27.1 12.4 0.4 24.8 12.6 12.3 22.1 25.5 12.2 6.8 17.3 12.2 19.5 41.8 6.0 25.6 9.6 11.6 12.4 14.2 9.5

Neutral Note: # FY13E Estimates; Prices as on 13 July 2012 Gujarat Gas estimates for CY12E Source: Company, Centrum Research Estimates

12

Oil & Gas

Appendix A
Disclaimer
Centrum Broking Limited (Centrum) is a full-service, Stock Broking Company and a member of The Stock Exchange, Mumbai (BSE) and National Stock Exchange of India Ltd. (NSE). Our holding company, Centrum Capital Ltd, is an investment banker and an underwriter of securities. As a group Centrum has Investment Banking, Advisory and other business relationships with a significant percentage of the companies covered by our Research Group. Our research professionals provide important inputs into the Group's Investment Banking and other business selection processes. Recipients of this report should assume that our Group is seeking or may seek or will seek Investment Banking, advisory, project finance or other businesses and may receive commission, brokerage, fees or other compensation from the company or companies that are the subject of this material/report. Our Company and Group companies and their officers, directors and employees, including the analysts and others involved in the preparation or issuance of this material and their dependants, may on the date of this report or from, time to time have "long" or "short" positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. Centrum or its affiliates do not own 1% or more in the equity of this company Our sales people, dealers, traders and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. 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This document has not been prepared by or in conjunction with or on behalf of or at the instigation of, or by arrangement with the company or any of its directors or any other person. Information in this document must not be relied upon as having been authorized or approved by the company or its directors or any other person. Any opinions and projections contained herein are entirely those of the authors. None of the company or its directors or any other person accepts any liability whatsoever for any loss arising from any use of this document or its contents or otherwise arising in connection therewith. Centrum and its affiliates have not managed or co-managed a public offering for the subject company in the preceding twelve months. Centrum and affiliates have not received compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for service in respect of public offerings, corporate finance, debt restructuring, investment banking or other advisory services in a merger/acquisition or some other sort of specific transaction. As per the declarations given by them, Mr. Rohit Nagraj, research analyst and and/or any of his family members do not serve as an officer, director or any way connected to the company/companies mentioned in this report. Further, as declared by him, he has not received any compensation from the above companies in the preceding twelve months. Our entire research professionals are our employees and are paid a salary. They do not have any other material conflict of interest of the research analyst or member of which the research analyst knows of has reason to know at the time of publication of the research report or at the time of the public appearance. While we would endeavour to update the information herein on a reasonable basis, Centrum, its associated companies, their directors and employees are under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent Centrum from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or Centrum policies, in circumstances where Centrum is acting in an advisory capacity to this company, or any certain other circumstances Key to Centrum Investment Rankings: Stock to Sector Sector to Market Outperform Outperform Neutral Underperform Outperform Neutral Neutral Underperform Outperform Underperform Neutral Underperform Accumulate: Add on decline; Reduce: Sell on rise Stock to Sector This is the relative rating of the stock to the sector and reflects its relative attractiveness vis--vis other coverage stocks in the sector. Sector to Market This is the relative rating of the sector vis--vis the other sectors in the coverage space. This is derived based on the conviction of the analyst on a sector and macro view outlined in market strategy. Stock to Market The final rating on the stock is obtained as a combination of the stock to sector and sector to market view as outlined in the table above. Stock to Market Buy Buy Accumulate Neutral Neutral Neutral Reduce Sell Sell

Member (NSE, BSE, MCX-SX), Depository Participant (CDSL) and SEBI registered Portfolio Manager Registration Nos. CAPITAL MARKET SEBI REGN. NO.: BSE: INB011454239, NSE: INB231454233 DERIVATIVES SEBI REGN. NO.: NSE: INF231454233 (TRADING & SELF CLEARING MEMBER) CDSL DP ID: 12200. SEBI REGISTRATION NO.: IN-DP-CDSL-20-99 PMS REGISTRATION NO.: INP000000456 MCX SX (Currency Derivative segment) REGN. NO.: INE261454236 Website: www.centrum.co.in Investor Grievance Email ID: investor.grievances@centrum.co.in Compliance Officer Details: Mr. Praveen Malik; Tel: (022) 4215 9703; Email ID: praveen.malik@centrum.co.in

Centrum Broking Limited

Registered Office Address Bombay Mutual Building , 2nd Floor, Dr. D. N. Road, Fort, Mumbai - 400 001 Correspondence Address Centrum House 6th Floor, CST Road, Near Vidya Nagari Marg, Kalina, Santacruz (E), Mumbai 400 098. Tel: (022) 4215 9000