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Volume No.. I Issue No. 175 Reliance Industries Ltd. May 25, 2018
BSE Code: 500325 NSE Code: RELIANCE Reuters Code: RELI.NS Bloomberg Code: RIL:IN
Market Data
RIL is the largest private sector company in India, with businesses in the energy,
petrochemicals, textiles, natural resources, retail, and telecommunications. It has
a strong presence in the integrated energy value chain and pre-eminent position
Rating BUY
CMP (Rs.) 922
in retail and digital services in India.
Target (Rs.) 1,013
Strong operating performance: RIL reported a strong show in Q4FY18 with Potential Upside 10%
18% YoY growth in standalone revenue thanks to its improved performance from Duration Long Term
petrochemicals segment. Further, demand recovery post GST stabilization and Face Value (Rs.) 10
improving economic activity also supported growth. EBITDA increased at a strong 52 week H/L (Rs.) 1011/649
pace of 19% YoY supported by performance of petrochemical segment, however,
Decline from 52WH (%) 9%
EBITDA margin improved marginally by 19 bps YoY to 15.3% due to disappointing
refining margins. Adj. PAT grew by just 6.7% YoY due to sharp increase (↑521% Rise from 52WL (%) 42%
YoY) in interest expense. Going forward, we expect revenue/adj.PAT to grow at a Beta 1.2
CAGR of 13%/9% over FY18-20E led by healthy gross refining margin (GRM) and Mkt. Cap (Rs.Cr) 583,929
strong growth momentum in petchem segment.
Healthy GRM to drive refining segment: Despite 16% YoY growth in refining
Fiscal Year Ended
revenue during the quarter on account of higher crude oil prices, EBIT declined
11% YoY largely due to reduced crude throughput (down 4% YoY) and adverse
Y/E FY17 FY18E FY19E FY20E
movement in Brent-Dubai differentials. As a result, EBIT margin contracted by 229
bps YoY to 7.5%. RIL’s GRM came in at $11 per barrel during Q4FY18 and Revenue
2,42,025 2,90,042 3,65,670 3,73,401
outperformed Singapore complex refining margins by USD4/bbl (USD5.1/bbl in (Rs.Cr)
Adj. profit
Q4FY17) due to lower light‐heavy and Brent-Dubai differentials. We expect GRMs 31,425 33,612 37,521 39,721
(Rs.Cr)
to remain strong (in the range of USD11-12/bbl) over FY18-20E as oil demand
stays robust with no major capacity addition in sight. Further, refining capacity Adj. EPS (Rs.) 49.6 53.1 59.2 62.7
addition of 0.8mbpd in 2018 will also drive growth going ahead. P/E (x) 18.6 17.4 15.6 14.7
Petchem maintains strong growth momentum: Petchem segment grew
strongly with 46% YoY increase in revenue on the back of higher volumes from P/BV (x) 2.0 1.9 1.7 1.5
new paraxylene, refinery offshore cracker (ROGC) and downstream units. Volumes ROE (%) 11.6 11.1 11.3 10.9
grew 42% YoY supported by ramp-up of the recently commissioned ROGC.
Further, Petcoke gasifier is expected to be fully operational by H1FY19. EBIT
increased by 84% YoY leading to 356 bps YoY increase in EBIT margin to 17.2% on Shareholding Pattern Sep-17 Dec-17 Mar-18
the back of strong volumes and higher margins from polypropylene, polyester and
fiber intermediate products. Going forward, with near full utilization of petchem Promoters 47.6 47.5 47.5
projects and expected firming-up of propylene and MEG margins will boost RIL’s FII’s 23.6 24.1 24.3
earnings. MFs/Insti 11.8 11.7 11.5
Outlook and Valuation: Public 10.1 9.6 9.5
Going forward, improved petchem performance coupled with rising refining Others 6.9 7.1 7.2
margins globally augurs well for RIL’s earnings’ outlook. Driven by strong outlook,
we recommend ‘BUY’ rating on the stock with a target price (TP) of Rs 1013 based One year price chart
on sum of the parts (SOTP) valuation methodology wherein we value its
standalone business at Rs 640 (P/E of 10x for FY20E) and investments at Rs 374. RIL Sensex (Rebased)
900
400
May-17
Apr-18
May-18
Dec-17
Aug-17
Mar-18
Jun-17
Oct-17
Jan-18
Nov-17
Jul-17
Sep-17
Feb-18
80000 19.0%
58212 60002
60000 17.9% 5174117.8% 18.0%
3934716.9% 43256
17.0%
40000
15.9% 16.1% 16.0%
20000 15.0%
0 14.0%
FY16 FY17 FY18 FY19E FY20E
5.0
0.0
FY16 FY17 FY18 FY19E FY20E
Total operating Income 2,42,025 2,90,042 3,65,670 3,73,401 Paid up capital 3,251 6,335 6,335 6,335
Profit & Loss Account (Standalone)
Raw Material cost 1,64,572 2,02,065 2,61,774 2,66,748
Profit & Loss Account (Consolidated)
Reserves and Surplus 2,85,062 3,08,312 3,41,271 3,76,431
Employee cost 4,434 4,740 5,976 6,102
Net worth 2,88,313 3,14,647 3,47,606 3,82,766
Other operating expenses 29,763 31,496 39,709 40,548
Minority interest - - - -
EBITDA 43,256 51,741 58,212 60,002
Total Debt 1,07,446 96,835 76,835 61,835
Depreciation 8,465 9,580 11,002 11,592
Other non-current
EBIT 34,791 42,161 47,209 48,410 24,766 30,635 30,635 30,635
liabilities
Interest cost 2,723 4,656 3,502 2,819 Total Liabilities 4,20,525 4,42,117 4,55,076 4,75,236
Other Income 8,709 8,220 7,691 8,821 Total fixed assets 2,87,319 3,00,447 3,09,445 3,17,852
Profit before tax 40,777 45,725 51,398 54,412
Capital WIP
Tax 9,352 12,113 13,878 14,691
Goodwill 0 0 0 0
Profit after tax 31,425 33,612 37,521 39,721
Investments 1,92,450 2,25,222 2,45,222 2,65,222
Minority Interests - - - -
Net Current assets -71,846 -1,04,773 -1,20,811 -1,29,060
P/L from Associates - - - -
Other non-current
Adjusted PAT 31,425 33,612 37,521 39,721 12,602 21,221 21,221 21,221
assets
E/o income / (Expense) - - - - Total Assets 4,20,525 4,42,117 4,55,076 4,75,236
Reported PAT 31,425 33,612 37,521 39,721
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