>Reliance Communications (Anand Rathi)

Reliance Communications

Growth Undervalued; Re-iterate Buy

# New TP of Rs260. We have trimmed our EBITDA estimates by
1.0-1.5% and raised medium-term capex forecasts by 10-15%. Our
revised DCF-based Dec ’09 TP is Rs260 vs. Rs275 (Sep ’09)
previously. At 6.0x FY10e EV/EBITDA, we believe RCOM is
attractively valued, given the 17% EBITDA CAGR over FY10e-12e.

# Revenue growth recovery imminent; margins to hold. We
forecast 24% wireless rev CAGR in FY09-11e vs. 15% in FY09e
led by GSM expansion. Despite the build-up of a huge operating
leverage (pre-booking of GSM network costs), we assume another
100-bp erosion in wireless EBITDA margin. Nonetheless, consol.
EBITDA margin should hold at ~40% (40.2% in 3Q) in our view.

To see full report: RELCOM

>Reliance Industries (Macquarie Research)

Gas delay hurts more than crude cut

Event
We have revised our earnings forecasts to take account of actual prices in
2008 and changes to our oil price forecast for 2009 onwards. We have also
factored in the delay in the KG-D6 gas production and now expect commercial
sales of gas to start in April 2009 (previous expectation January 2009).

Impact
Cut in estimates. The delay in gas production and the cut to oil price forecast
result in an 8% and 6% cut to our FY09 and FY10 earnings forecasts,
respectively. RIL’s proposed gas price of US$4.2/mmbtu translates to an oil
equivalent price of US$25/boe. As this is significantly below the current oil
price and our forecast oil price, we do not envisage a cut in RIL’s gas prices.
Our cashflow estimates are reduced by 8% and 4% for FY09E and FY10E,
respectively. RIL should achieve a net cash position by FY12E.
We are also cutting our PAT estimates for 3Q FY09E to Rs36bn (-8% YoY), as
we believe that refining production has been lower than our earlier estimates.

To see full report : RIL