Reliance Stuns Analysts

With the results far exceeding market expectations, the stock should normally have risen far higher. While analysts had predicted lower profits, the company has managed to post a cash earnings per share of Rs 35.8, the same as the CEPS for 1995-96. The figure, however, does not take into consideration the impact of MAT on the companys bottomline. This could be one reason for the scepticism.

The other reason stems from the fact that the company has been able to do unbelievably well, keeping margins intact even during the downward swing in the petroproducts market.

The companys price-earnings ratio is around 7, which is all right for a commodity company, but hardly enough for a company which has shown an ability to beat the industry cycle. Obviously, the market seems to take the results with a pinch of salt.

 

The future, however, could change analyst perceptions about the scrip. New capacities coming on stream should add to earnings.

The company has no plans so far of a further dilution in equity, it has been able to access the long-term funds market abroad at reasonable rates and petrochemical prices seem to be improving.

And if it can perform so well in a depressed market scenario, making profits during boom time should be childs play.