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Hold Reliance Industries, target of Rs 1900: Sharekhan

Posted on: July 9th, 2009 and is filed under Brokerage Recommendations.

Sharekhan has maintained its hold rating on Reliance Industries with a price target of Rs 1900 in its report dated July 7, 2009.

“Union Budget 2009-10 has increased the minimum alternate tax (MAT) including surcharges to 17% from 11.3% earlier. To account for higher incidence of MAT, we have lowered RIL’s FY2010E earnings per share (EPS) by 4% to Rs 124.1 and FY2011E EPS by 5% to Rs 152.4. Further, we have also reduce our current net present value (NPV) estimate for Krishna-Godavari (KG) D-6 by 4% to USD16.6 billion due to higher MAT. This means a negative impact of Rs 36 per share on RIL’s value. The budget 2009-10 also provides that an undertaking can claim income tax exemption under section 80 IB of Income Tax Act on profits from natural gas production for a period of seven years from blocks offered under New Exploration Licensing Policy (NELP) VIII. Logically, this does not include tax holiday on natural gas production from KG D-6 by RIL. We maintain our Hold rating on the stock with the sum of the parts (SOTP)-based price target of Rs 1,900, “ says Sharekhan’s report.

source: Moneycontrol

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