Buy RPL at the CMP:

Due to the political issues RPL is much affected from last couple of weeks. It fell from 170+ level to 140+ level. Now, every investor starts thinking what is going to happen? Is further grinding will happen or from here it will move up? Whether we have to add it or to sell it? Every RPL investor starts thinking about this!
In my view, it is the last chance to grab RPL at this CMP. What will happen if the EOU status is removed and windfall tax is imposed? Is it really hurt the bottom line?
Some of the facts about the RPL:
First on positive side:
1. Production is ahead of schedule.
2. In last month MF houses bought this scrip hugely
3. Most of the FIIs and DIIs are targeting around 210/- level.(morgan stanely,citi, kotak, enam etc.,)
4. Stock is slipping on because of rumors only, still there is no official comment regarding imposing windfall tax and banning EOU status.
5. Even if you considering the above two issues then the financial may like below.
6. If government is unable to show the strength then markets will slip further and RIL and RPL will bounce sharply
Negative side:
1.Windfall tax and EOU status
2.Sudden slip in Crude price
3.Amar singh targeting the MAD (mukesh ambani dhirubhai) group
4.Some of the FIIs came with sell report targeting the 145/-


We analyzed the whole issue and got some points finally. After assuming that the EOU status is removed and windfall tax is imposed then the numbers will be in this passion:

Fiscal year end 31-Mar 2009E 2010E

Before EOU and windfall issue:

Pre-tax profit 62,660 114,134
Tax 0 -707
EPS adjusted 13.92 25.21

After EOU and windfall issue:

Pre-tax profit 62,660 114,134
Tax -9399 -17120
Windfall tax -2000 -2000
Equity 4501 4501
EPS 11.38 21.01

So, even these issues the expected EPS for FYO9 is 11.38 and for FY10 is 21.01
The FY09 results are based only assuming that production will start on December 2008 if it is ahead of the schedule then the EPS will improve accordingly means we may see production will start on September 2008 then the EPS would be around 15 for the FY09. Then assuming the very very low PE 15 then the price for FY09 should be at 225/- means a huge jump from the CMP.

With thanks
Be and make