02 November 2020 Results Review 2QFY21 Reliance Industries HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters In-line performance! Our ADD rating on RIL with a price target of INR 2,140 /sh is premised on (1) induction of Facebook, Google, Intel and Qualcomm as partners in Jio Platform, which should enable the company to accelerate the growth of digital connectivity and create value in the digital ecosystem through technology offerings, (2) recovery in refining and petchem businesses in FY22E, (3) the emergence of a clear path to a stronger balance sheet, and (4) stake sale in the retail business. RIL reported standalone revenue/EBITDA of INR 563/76bn, -35/-44% YoY (in line with our estimates). Standalone APAT stood at INR 65bn, -33% YoY (HSIE est: INR 36bn). The deviation in APAT from the estimates was mainly due to the tax expense reversal on account of reduction in the annual effective tax rate for FY21. Standalone refining segment: Crude throughput declined 8/8% YoY/QoQ to 15.3mmt. GRM stood at USD 5.7/bbl, down from USD 6.3/bbl in 1Q. The sequential decline in refining margin was due to lower cracks across products. RIL's GRMs outperformed Singapore GRM by USD 5.7/bbl (as against USD 7.2/bbl in 1Q). Standalone petrochemical segment: Production during 2Q was 9.7mmt, - 2/+9% YoY/QoQ. Petchem EBITDA was INR 59bn, -33% YoY given pricing pressure because of disruptions in the local and global markets. EBITDA/t stood at INR 6,052 (vs. INR 8,839/4,860 YoY/QoQ). RJio: Revenue grew by ~33/6% YoY/QoQ to INR 175bn. ARPU rose to INR 145 (+14/3% YoY/QoQ) while the gross/net subscriber addition was ~27/7mn. We expect ARPU to increase to INR 148/160 in FY21/22E owing to tariff hike in Dec-19. Reliance Retail (RR): Recovery from the pandemic has been encouraging across categories. Revenue nearly hit base quarter levels (Rs. 411bn). 85% of stores are now operational (1Q: 50%), of which half are fully operational. Footfalls clocked 75% of pre-covid levels (vs 43% in 1Q). Consumer Electronics (CE) doubled, and Fashion & Lifestyle (F&L) tripled their top- lines respectively from their 1QFY21 lows (Yet to recoup base quarter sales). Grocery and connectivity continued their strong growth momentum. EBITDAM expanded 160bp QoQ to 5.4% as the mix sharply improved in favour of the high margin CE and F&L segment. (Note: EBITDAM still remains 90bp short of 2QFY20 levels). Financial Summary – Consolidated Year Ending March (INR bn) 2Q FY21 1Q FY21 QoQ (%) 2Q FY20 YoY (%) FY20 FY21E FY22E FY23E Net Sales 1,112 883 26.0 1,485 (25.1) 5,967 4,718 6,068 6,965 EBITDA 189 169 12.3 222 (14.5) 882 708 964 1,076 PAT 105 129 (18.8) 113 (7.1) 427 369 555 640 Diluted EPS (INR) 14.8 14.2 4.4 19.0 (21.9) 67.4 57.3 82.0 94.7 P/E (x) 30.5 35.9 25.0 21.7 EV / EBITDA (x) 17.7 19.1 13.2 11.5 RoE (%) 10.2 7.7 10.2 10.3 Source: Company, HSIE Research ADD CMP (as on 30 Oct 2020) INR 2,054 Target Price INR 2,140 NIFTY 11,642 KEY CHANGES OLD NEW Rating ADD ADD Price Target INR 2,051 INR 2,140 EPS % FY21E FY22E +10.7 +1.6 KEY STOCK DATA Bloomberg code RIL IN No. of Shares (mn) 6,339 MCap (INR bn) / ($ mn) 13,024/174,,681 6m avg traded value (INR mn) 39,030 52 Week high / low INR 2,371/867 STOCK PERFORMANCE (%) 3M 6M 12M Absolute (%) (2.6) 41.5 40.2 Relative (%) (7.6) 24.0 41.3 SHAREHOLDING PATTERN (%) Sept-20 Jun-20 Promoters 50.49 50.37 FIs & Local MFs 13.39 13.61 FPIs 25.20 24.72 Public & Others 10.92 11.30 Pledged Shares 0.0 0.0 Source : BSE Harshad Katkar [email protected]+91-22-6171-7319 Nilesh Ghuge [email protected]+91-22-6171-7342 Jay Gandhi [email protected]+91-22-6171-7320 Divya Singhal [email protected]+91-22-6171-7348 Rutvi Chokshi [email protected]+91-22-6171-7356
Transcript
02 November 2020 Results Review 2QFY21
Reliance Industries
HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters
In-line performance!
Our ADD rating on RIL with a price target of INR 2,140 /sh is premised on (1)
induction of Facebook, Google, Intel and Qualcomm as partners in Jio
Platform, which should enable the company to accelerate the growth of digital
connectivity and create value in the digital ecosystem through technology
offerings, (2) recovery in refining and petchem businesses in FY22E, (3) the
emergence of a clear path to a stronger balance sheet, and (4) stake sale in the
retail business.
RIL reported standalone revenue/EBITDA of INR 563/76bn, -35/-44% YoY
(in line with our estimates). Standalone APAT stood at INR 65bn, -33% YoY
(HSIE est: INR 36bn). The deviation in APAT from the estimates was mainly
due to the tax expense reversal on account of reduction in the annual
From 2nd March 2020, we have moved to new rating system
RECOMMENDATION HISTORY
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
Oct
-19
No
v-1
9
Dec
-19
Jan
-20
Feb
-20
Mar
-20
Ap
r-20
May
-20
Jun
-20
Jul-
20
Au
g-2
0
Sep
-20
Oct
-20
Reliance Inds TP
Page | 10
Reliance Industries: Results Review 2QFY21
Disclosure:
We, Harshad Katkar, MBA, Nilesh Ghuge, MMS, Jay Gandhi, MBA, Divya Singhal, CA, & Rutvi Chokshi, CA authors and the names subscribed to this
report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. HSL has no
material adverse disciplinary history as on the date of publication of this report. We also certify that no part of our compensation was, is, or will be directly or
indirectly related to the specific recommendation(s) or view(s) in this report.
Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative
or HDFC Securities Ltd. or its Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding
the date of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material
conflict of interest.
Any holding in stock –No
HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475.
Disclaimer:
This report has been prepared by HDFC Securities Ltd and is solely for information of the recipient only. The report must not be used as a singular basis of any
investment decision. The views herein are of a general nature and do not consider the risk appetite or the particular circumstances of an individual investor;
readers are requested to take professional advice before investing. Nothing in this document should be construed as investment advice. Each recipient of this
document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in securities of the companies
referred to in this document (including merits and risks) and should consult their own advisors to determine merits and risks of such investment. The
information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be
reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy,
completeness or correctness. All such information and opinions are subject to change without notice. Descriptions of any company or companies or their
securities mentioned herein are not intended to be complete. HSL is not obliged to update this report for such changes. HSL has the right to make changes and
modifications at any time.
This report is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity who is a citizen
or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be
contrary to law or regulation or what would subject HSL or its affiliates to any registration or licensing requirement within such jurisdiction.
If this report is inadvertently sent or has reached any person in such country, especially, United States of America, the same should be ignored and brought to
the attention of the sender. This document may not be reproduced, distributed or published in whole or in part, directly or indirectly, for any purposes or in
any manner.
Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or
price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively
assume currency risk. It should not be considered to be taken as an offer to sell or a solicitation to buy any security.
This document is not, and should not, be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report
should not be construed as an invitation or solicitation to do business with HSL. HSL may from time to time solicit from, or perform broking, or other services
for, any company mentioned in this mail and/or its attachments.
HSL and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of
the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a
market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any
other potential conflict of interests with respect to any recommendation and other related information and opinions.
HSL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments
made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates,
diminution in the NAVs, reduction in the dividend or income, etc.
HSL and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt
in the report, or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies / organizations
described in this report.
HSL or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject
company for any other assignment in the past twelve months.
HSL or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the
date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage
services or other advisory service in a merger or specific transaction in the normal course of business.
HSL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with
preparation of the research report. Accordingly, neither HSL nor Research Analysts have any material conflict of interest at the time of publication of this
report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. HSL may
have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of
the subject company. We have not received any compensation/benefits from the subject company or third party in connection with the Research Report.
HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg
