- Ratnamani Metals & Tubes has secured a order worth Rs 90 crore from a petrochemical company and two export orders worth Rs 30 crore from European companies.
- EID Parry India has entered into a 50:50 joint venture with Roca of Spain for parryware business.
- Reliance Industries is likely to raise about Rs660 crore though an overseas bond issue to fund the capex of its refining and petrochemicals businesses.
Selan Exploration Technology
Recommendation: Buy
CMP = Rs 58
Price target: Rs 94
- Developing its oil assets: Selan Exploration Technology Ltd (SETL) aims to considerably ramp up its production through the development of its oil & gas fields.
- In the first phase, it has embarked on the development of ten oil producing wells in the Bakrol oil field which is estimated to increase the production by at least 500 barrel of oil per day (bpod) over the next 18-24 months.
- Consequently, its earnings are estimated to grow at a CAGR of 39% over FY2006-09E. The first batch of the two additional wells is likely to come on stream by Q2FY2007.
- Relatively de-risked business model: Unlike its peers, SETL has not invested in exploratory blocks and all of its oil fields are located in the category I sedimentary basin that has a track record of proven commercial production. This means that it is not exposed to the inherent risk associated with the exploration business.
- Attractive valuation: At an enterprise value (EV)/reserve of $0.7 per barrel of oil & oil equivalents (boe), the stock is trading at relatively much cheaper valuations as compared with the other domestic companies like Hindustan Oil Exploration Company (HOEC) and Oil and Natural Gas Corporation (ONGC). Globally, exploration and production (E&P) companies command a valuation in excess of $7-8 per boe of the estimated proven and probable (2P) reserve.
- The stock is expected to get re-rated with the commercialisation of additional wells and ramp-up in the production. We recommend a Buy call on the stock with a price target of Rs94 (based on EV/reserve of $1.1/boe which is at a 75% discount to the prevailing valuations of HOEC).
