Analysts' pick: Reliance Petroleum

Target price: Rs 115 

Brics Securities has downgraded its rating on the stock from neutral to ‘underperform’ saying it sees no margin of safety at the current price. 

“We are lowering our FY09-12(estimated) EPS estimates for RPL after factoring in lower GRM (gross refining margins) and a weaker rupee. Our forecast for lower GRMs is based on the deteriorating outlook for the global oil refining industry,” said the broking house in a note to its clients. 

The outfit has revised its GRM estimates downwards on the back of worsening fundamentals for the oil refining industry due to large capacity additions, weakening demand growth and increasing complexity of new refineries. 

“These factors will result in lower capacity utilisation for refineries and reduce the advantage enjoyed by complex refiners. FY09E earnings are also negatively affected by lowering of our throughput estimates by 19.5% to 7.6 mmt (million metric tonne) due to a later start-up than our expectation,” the note added.