HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters
RESULTS REVIEW 3QFY19 18 JAN 2019
Reliance Industries
BUY
.
Sailed through a tough time In 3QFY19, RIL proved itself yet again largely owing to better petchem margins and volumes, despite weaker GRMs. Petchem EBIT/kg stood at Rs 20.7/kg, up 16.3% YoY. This expansion of margins was owing to a better product mix and use of US ethane/refinery off-gases as a feedstock. Petchem production volumes were up 21.3% YoY to 9.7mmt, with the refinery off gas cracker (ROGC) ramping up. The performance of the refining segment was subdued. GRM was USD 8.8/bbl owing to volatility in crude oil prices, and weak light distillates spread. Q3 EBITDA and PAT stood at Rs 145.07bn and Rs 89.28bn respectively, each up 5.6% YoY.
The International Maritime Organisation (IMO) has revised its bunker sulfur regulations, which will be implemented from Jan-20. This will result in (1) Higher Gasoil and LSFO demand (2) Widening of the L-H differential. In turn, resulting in higher GRMs in FY20/21 for Indian refiners who have higher share of middle distillates in their production mix.
Post stabilization of the ROGC and Px plants, petrochemical output achieved a peak volume of 9.7mmt in 3Q. While cracker margins could see near-term pressure on commissioning of new units in the US, integration and cost efficiencies from recent
projects should enable RIL to continue to post healthy margins.
Our SOTP-based target for RIL is Rs 1,331/sh based on Dec-20 earnings (6.5x EV/e for standalone refining, 9x EV/e for petchem, Rs 6.0/sh for domestic E&P, 1x EV/invested capital for Shale, 20x EV/e for Retail and 10x EV/e for Telecom. Maintain BUY. (Refer our note on Reliance Jio)
Highlights of the quarter
Refining: GRM stood at USD 8.8/bbl (-24.1% YoY, -7.4% QoQ). The sequential decline is owing to the lower light distillates cracks. The premium over Singapore GRMs widened to USD 4.5/bbl (vs. USD 3.4 in 2QFY19).
Petchem: Px and PTA margins were strong during the quarter. Px/PTA margins were up +75/+46% YoY. Petcoke gasifier stabilization is in-progress, which is expected to be completed by Mar-19.
Oil & Gas: Revenue was down 19.8% YoY, despite realization being up 54% owing to ~34% decline in production. Average gas production from KGD6 was 1.87mmscmd (-62% YoY, -46% QoQ).
Near term outlook: We expect the GRM to be higher owing to IMO specification changes which will support middle distillate cracks.
FINANCIAL SUMMARY (Standalone) Year Ending March (Rs bn) 3QFY19 3QFY18 YoY(%) 2QFY19 QoQ (%) FY18 FY19E FY20E FY21E Net Sales 1,000.96 732.56 36.6 961.67 4.1 2,900.42 3,931.46 3,963.65 3,993.06 EBITDA 145.07 137.44 5.6 148.92 (2.6) 517.41 588.55 690.02 709.04 PAT 89.28 84.54 5.6 88.59 0.8 336.12 372.94 448.27 471.54 Diluted EPS (Rs) 13.7 13.3 3.1 13.6 0.8 53.1 58.9 70.8 74.4 P/E (x) 21.4 19.3 16.0 15.2 EV / EBITDA (x) 15.6 14.1 11.8 11.2 RoE (%) 11.1 11.3 12.3 11.7 Source: Company, HDFC sec Inst Research
INDUSTRY OIL & GAS
CMP (as on 17 Jan 2019) Rs 1,134
Target Price Rs 1,331
Nifty 10,905
Sensex 36,374
KEY STOCK DATA
Bloomberg RIL IN
No. of Shares (mn) 6,339
MCap (Rs bn) / ($ mn) 7,191/101,256
6m avg traded value (Rs mn) 10,731
STOCK PERFORMANCE (%)
52 Week high / low Rs 1,329/871
3M 6M 12M
Absolute (%) (1.5) 3.9 22.7
Relative (%) (6.0) 4.3 19.0
SHAREHOLDING PATTERN (%)
Promoters 47.27
FIs & Local MFs 12.01
FPIs 24.31
Public & Others 16.41
Source : BSE
Nilesh Ghuge [email protected] +91-22-6171-7342
Divya Singhal [email protected] +91-22-6639-3038
RELIANCE INDUSTRIES : RESULTS REVIEW 3QFY19
Page | 2
Quarterly Financials Snapshot (Standalone) (Rs bn) 3QFY19 3QFY18 YoY(%) 2QFY19 QoQ (%) 9MFY19 9MFY18 YoY %
Revenues 1,000.96 732.56 36.6 961.67 4.1 2,874.22 2,060.05 39.5
Material Expenses 747.93 497.17 50.4 707.98 5.6 2,114.85 1,413.93 49.6
Employee Expenses 14.56 11.42 27.5 14.93 (2.5) 44.29 34.94 26.8
Other Operating Expenses 93.40 86.53 7.9 89.84 4.0 269.55 228.02 18.2
EBIDTA 145.07 137.44 5.6 148.92 (2.6) 445.53 383.16 16.3
Depreciation 25.86 24.75 4.5 27.45 (5.8) 80.93 69.01 17.3
EBIT 119.21 112.69 5.8 121.47 (1.9) 364.60 314.15 16.1
Other Income 24.56 16.24 51.2 20.12 22.1 65.36 55.99 16.7
Interest Cost 24.05 10.94 119.8 24.17 (0.5) 69.60 31.96 117.8
PBT 119.72 117.99 1.5 117.42 2.0 360.36 338.18 6.6
Tax 30.44 33.45 (9.0) 28.83 5.6 94.29 89.03 5.9
RPAT 89.28 84.54 5.6 88.59 0.8 266.07 249.15 6.8
APAT 89.28 84.54 5.6 88.59 0.8 266.07 249.15 6.8
EPS 13.7 13.3 3.1 13.6 0.8 40.9 38.9 5.1
Source: Company, HDFC Sec Inst Research
Margin Analysis
3QFY19 3QFY18 YoY (bps) 2QFY19 QoQ (bps) 9MFY19 9MFY18 YoY (bps)
Material Expenses as % of Net Sales 74.7 67.9 685 73.6 110 73.6 68.6 494
Employee Expenses as % of Net Sales 1.5 1.6 (10) 1.6 (10) 1.5 1.7 (16)
Other Expenses as % of Net Sales 9.3 11.8 (248) 9.3 (1) 9.4 11.1 (169)
EBITDA Margin (%) 14.5 18.8 (427) 15.5 (99) 15.5 18.6 (310)
Net Profit Margin (%) 8.9 11.5 (262) 9.2 (29) 9.3 12.1 (284)
Tax Rate (%) 25.4 28.3 (292) 24.6 87 26.2 26.3 (16)
Source: Company, HDFC Sec Inst Research
EBITDA growth was led by higher Petchem margins and volumes were offset by lower GRMs Interest cost and depreciation cost was higher owing to the capitalization of the new projects in petchem and refining.
RELIANCE INDUSTRIES : RESULTS REVIEW 3QFY19
Page | 3
Quarterly Segmental Snapshot (Standalone) (Rs bn) 3QFY19 3QFY18 YoY(%) 2QFY19 QoQ (%) 9MFY19 9MFY18 YoY(%)
Segmental Revenues
Petrochemicals 453.31 325.33 39.3 430.22 5.4 1,273.07 834.42 52.6
Refining 888.83 638.06 39.3 814.71 9.1 2,517.33 1,820.32 38.3
Oil & Gas 6.03 7.52 (19.8) 7.36 (18.1) 20.93 20.94 (0.0)
Others 3.51 3.15 11.4 4.95 (29.1) 11.53 9.55 20.7
Gross Revenues 1,351.68 974.06 38.8 1,257.24 7.5 3,822.86 2,685.23 42.4
Less: Inter segment 266.07 185.42 43.5 226.38 17.5 713.21 440.60 61.9
Less: Excise Duty/service tax recovered 84.65 56.08 50.9 69.19 22.3 235.43 184.58 27.5
Net Revenues 1,000.96 732.56 36.6 961.67 4.1 2,874.22 2,060.05 39.5
Segmental Results Before Interest, Tax & Exceptionals
Petrochemicals 79.93 56.59 41.2 79.74 0.2 237.12 145.56 62.9
Refining 49.45 60.76 (18.6) 51.57 (4.1) 153.23 189.83 (19.3)
Oil & Gas 1.19 (0.91) (230.8) (1.86) (164.0) (3.12) (4.18) (25.4)
Others 0.44 1.20 (63.3) 0.06 633.3 0.88 3.75 (76.5)
Total 131.01 117.64 11.4 129.51 1.2 388.11 334.96 15.9
EBIT Margins (%)
Petrochemicals 17.6 17.4 24 18.5 (90) 18.6 17.4 118
Refining 5.6 9.5 (396) 6.3 (77) 6.1 10.4 (434)
Oil & Gas 19.7 (12.1) 3,184 (25.3) 4,501 (14.9) (20.0) 505
Source: Company, HDFC Sec Inst Research
Petrochemicals’ YoY growth in profitability was led by higher Px and PTA margins and increased throughput post the stabilisation of ROGC and Px plant Lower opex led to refining EBIT declining by just 4% QoQ despite a 7% fall in GRM
RELIANCE INDUSTRIES : RESULTS REVIEW 3QFY19
Page | 4
E&P business
KG-D6
KG-D6 gas volumes declined further to 1.86 mmscmd (-62% YoY, -46% QoQ). Oil volumes were at 0.010 mmbbl (-95% YoY, -92% QoQ). We expect KG D6 volume to ramp-up to 16 mmscmd, owing to R-series field development.
Update on R-cluster development: Drilling and lower completion for 2 wells out of 6 wells is completed.
PM
Gas volume was at 13.8 BCF (-11% YoY, 21% QoQ). Lower production was mainly on account of natural field decline and unplanned shutdown of wells owing to asset integrity issues.
CBM
The current production rate is ~0.9 mmscmd, with a gradual ramp-up in production taking place.
Shale Gas Average realisations were USD 4.2/mcfe (+1.3 YoY%,
+2.4% QoQ).
4QFY18 1QFY19 2QFY19 3QFY19
Production (BCFe) 28.7 23.8 21.2 20.9
Avg Realisation (USD/mcfe)
4.2 4.1 4.1 4.2
Gas price (USD/mmbtu)
3.0 2.8 2.9 3.6
Revenues (USD mn) 105 86 81 78
EBITDA (USD mn) 38 19 13 -1
Source: Company, HDFC Sec Inst Research
Refining business
The throughput was at 18 mmt (+1.7% YoY and QoQ 109% utilisation). GRM was at USD 8.8/bbl (-24% YoY, -7.4% QoQ). Sequential decline was owing to lower Gasoline and Naphtha cracks.
The premium over Singapore GRM widened to USD 4.4/bbl.
Gasoline cracks decreased QoQ from USD 12.1/bbl to USD 4.7/bbl. Naphtha crack declined from USD -1.4/bbl to USD -6.4/bbl. Gasoil cracks remained stable QoQ at USD 15.8/bbl. ATF cracks were down from USD15.3/bbl to USD15/bbl.
During the quarter, all gasifiers in DTA successfully stabilised.
DHDS debottlenecked to higher capacity and designed performance was achieved.
Petchem and fibres
Polymer: The spreads for PP were below the 5-year average at USD 259/mt. HDPE-Naphtha spread improved marginally to USD 590/mt from USD 557/mt in 2Q. PVC margin declined to USD 410/mt from USD 494mt in 2Q. Polymer production was up 17% YoY and 5.8% QoQ to 1.489mmt.
Polyester: Polyester intermediate margins were strong particularly for Px and PTA, up +75/+46% YoY respectively.
Current production from CBM asset is ~0.9mmscmd Gas production from R-cluster expected in 2HFY21 is 12mmscmd, which will be ramped up to 32mmscmd by FY22 The Chinese Govt’s enforcement of a complete ban on the import of wastes (plastic, paper, slag and textiles) from other countries is driving demand for virgin polymer, thus supporting margins
RELIANCE INDUSTRIES : RESULTS REVIEW 3QFY19
Page | 5
Refineries’ Performance RIL’s GRM Trend vs. Singapore Complex GRM
Source: Company, HDFC Sec Inst Research Petchems’ Performance Petchem Sales Volumes
Source: Company, HDFC Sec Inst Research
Crude Throughput (MnT)
v
Source: Company, HDFC Sec Inst Research
Petchem EBIT and EBIT/kg
Source: Company, HDFC Sec Inst Research
GRM is lower QoQ because of lower Gasoline and Naphtha cracks
EBIT/kg of sales volumes stood at Rs 20.7/kg compared to Rs 21.5/kg in 2Q and 17.2/kg in 3QFY18 down 3% QoQ and up 21% YoY
10
.8
11.5
10
.1
10
.8
11.5
11
.9
12
.0
11.6
11.0
10.5
9.5
8.8
7.7
5.0
5.1
6.7
6.4
6.4
8.3
7.2
7.0
6.0
6.1
4.3
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
4QFY
16
1QFY
17
2QFY
17
3QFY
17
4QFY
17
1QFY
18
2QFY
18
3QFY
18
4QFY
18
1QFY
19
2QFY
19
3QFY
19
RIL GRM Singapore GRM$/bbl
17.8
16.8
18.0
17.8
17.5
17.3
18.1
17.7
16.7
16.6
17.7
18.0
15.0
15.5
16.0
16.5
17.0
17.5
18.0
18.5
4QFY
16
1QFY
17
2QFY
17
3QFY
17
4QFY
17
1QFY
18
2QFY
18
3QFY
18
4QFY
18
1QFY
19
2QFY
19
3QFY
19
2,59
9
2,4
86
2,5
64
2,41
7
2,6
17
2,7
65
3,0
58
3,32
6
3,5
47
3,50
5
3,70
7
3,86
8
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4QFY
16
1QFY
17
2QFY
17
3QFY
17
4QFY
17
1QFY
18
2QFY
18
3QFY
18
4QFY
18
1QFY
19
2QFY
19
3QFY
19
kTkT
27
29 35
34
35 40
49
57 6
3
77
80
80
-
5.0
10.0
15.0
20.0
25.0
15
25
35
45
55
65
75
85
95
4QFY
16
1QFY
17
2QFY
17
3QFY
17
4QFY
17
1QFY
18
2QFY
18
3QFY
18
4QFY
18
1QFY
19
2QFY
19
3QFY
19
EBIT Rsbn EBIT (Rs/kg)-RHSRs bn
Rs/kg
RELIANCE INDUSTRIES : RESULTS REVIEW 3QFY19
Page | 6
Polymers’ Performance Polyesters’ Performance Polymers’ Production
Source: Company, HDFC Sec Inst Research Polymer Margins (Indicative Industry Spreads)
Source: Company, HDFC Sec Inst Research
Intermediates’ Production Volumes
Source: Company, HDFC Sec Inst Research Polyester Production Volumes
Source: Company, HDFC Sec Inst Research
Polyester intermediate production was up 22% YoY and 4% QoQ to 2.84mmt with the start- of a new Px and MEG plant in Jamnagar Polyester production was up 12% YoY and down 6% QoQ to 697kt
-
200
400
600
800
1,000
1,200
1,400
1,600
4Q
FY1
6
1Q
FY1
7
2Q
FY1
7
3Q
FY1
7
4Q
FY1
7
1Q
FY1
8
2Q
FY1
8
3Q
FY1
8
4Q
FY1
8
1Q
FY1
9
2Q
FY1
9
3Q
FY1
9
PE PP PVCkt
-
500
1,000
1,500
2,000
2,500
3,000
4Q
FY1
6
1Q
FY1
7
2Q
FY1
7
3Q
FY1
7
4Q
FY1
7
1Q
FY1
8
2Q
FY1
8
3Q
FY1
8
4Q
FY1
8
1Q
FY1
9
2Q
FY1
9
3Q
FY1
9
PX PTA MEGkt
-
100
200
300
400
500
600
700
800
900
4Q
FY16
1Q
FY17
2Q
FY17
3Q
FY17
4Q
FY17
1Q
FY18
2Q
FY18
3Q
FY18
4Q
FY18
1Q
FY19
2Q
FY19
3Q
FY19
PP - Propylene HDPE - Naphtha
PVC - Naphtha - EDC
US$/t
-
100
200
300
400
500
600
700
800
4QFY
16
1QFY
17
2QFY
17
3QFY
17
4QFY
17
1QFY
18
2QFY
18
3QFY
18
4QFY
18
1QFY
19
2QFY
19
3QFY
19
POY PSF PETkt
RELIANCE INDUSTRIES : RESULTS REVIEW 3QFY19
Page | 7
US Shale Performance Production Volumes And Gas Realisation
Source: Company, HDFC Sec Inst Research Domestic E&P Performance
PMT: Production Volumes And Gas Realisation
Source: Company, HDFC Sec Inst Research
Key Financials Trend
Source: Company, HDFC Sec Inst Research
KG: Production Volumes And Gas Realisation
Source: Company, HDFC Sec Inst Research
Average realisations were USD 4.2/mcfe (+1.3 YoY%, +2.4% QoQ)
PM gas volume was at 13.8 BCF (-7% YoY, -8.6% QoQ). Lower production was mainly on account of natural field decline and unplanned shutdown of wells owing to asset integrity issues
KG-D6 gas volumes declined further to 1.86 mmscmd.
-
10.0
20.0
30.0
40.0
50.0
60.0
-
1.0
2.0
3.0
4.0
4Q
FY1
6
1Q
FY1
7
2Q
FY1
7
3Q
FY1
7
4Q
FY1
7
1Q
FY1
8
2Q
FY1
8
3QFY
18
4Q
FY1
8
1Q
FY1
9
2Q
FY1
9
3Q
FY1
9
Production (RS) Gas price (US$/mmbtu)
US$/mmbtu BCFe
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
-2.0 4.0 6.0 8.0
10.0 12.0 14.0 16.0 18.0 20.0
4QFY
16
1QFY
17
2QFY
17
3QFY
17
4QFY
17
1QFY
18
2QFY
18
3QFY
18
4QFY
18
1QFY
19
2QFY
19
3QFY
19
PMT Gas Vol (BCM) PM Gas Price ($/mmbtu)
BCM $/mmbtu
-15%
0%
15%
30%
45%
60%
(20)
-
20
40
60
80
100
120
4QFY
16
1QFY
17
2QFY
17
3QFY
17
4QFY
17
1QFY
18
2QFY
18
3QFY
18
4QFY
18
1QFY
19
2QFY
19
3QFY
19
Revenues EBITDA EBITDA Margin (%)
US$ mn
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
-
10.0
20.0
30.0
40.0
4Q
FY1
6
1Q
FY1
7
2Q
FY1
7
3QFY
17
4Q
FY1
7
1Q
FY1
8
2Q
FY1
8
3Q
FY1
8
4Q
FY1
8
1Q
FY1
9
2Q
FY1
9
3Q
FY1
9
KG Gas Volume (BCM) KG Gas Price ($/mmbtu)
BCM $/mmbtu
RELIANCE INDUSTRIES : RESULTS REVIEW 3QFY19
Page | 8
Retail Performance Key Financials’ Trend
Source: Company, HDFC Sec Inst Research
Store Additions And Performance Per Store
Source: Company, HDFC Sec Inst Research
Revenue from grocery, consumer electronics and fashion & lifestyle increased by 7.7% sequentially to Rs 199bn
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
-
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
4QFY
16
1QFY
17
2QFY
17
3QFY
17
4QFY
17
1QFY
18
2QFY
18
3QFY
18
4QFY
18
1QFY
19
2QFY
19
3QFY
19
Revenues non-petro Revenues PetroEBITDA Margin (%)
Rs bn
-
10
20
30
40
50
60
70
80
90
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
4QFY
16
1QFY
17
2QFY
17
3QFY
17
4QFY
17
1QFY
18
2QFY
18
3QFY
18
4QFY
18
1QFY
19
2QFY
19
3QFY
19
No of stores Revenues non-petro/store (Rs mn)Rs mn
RELIANCE INDUSTRIES : RESULTS REVIEW 3QFY19
Page | 9
Assumptions FY16 FY17 FY18 FY19E FY20E FY21E
Crude price (US$/bbl) 47.0 48.0 57.5 78.0 75.0 75.0
INR-USD 65.8 66.9 66.0 70.1 72.0 72.0
Refining Business
GRM (US$/bbl) 10.8 11.0 11.6 9.8 11.5 12.0
Crude throughput (mmt) 69.6 70.1 69.8 70.1 70.1 70.1
Upstream Business
PMT
Gas (BCF) 72 63 62 62 62 62
Oil (mmbbl) 7 6 5 5 5 5
Panna Mukta Gas price (US$/mmbtu) 5.7 5.7 5.7 5.7 5.7 5.7
Tapti Gas price (US$/mmbtu) 5.6 5.6 5.6 5.6 8.4 8.4
KG
Gas (mmscmd) 10 8 5 3 16 21
Gas price (US$/mmbtu) 4.7 3.1 3.5 4.0 4.0 4.0
Petrochemicals
Sales volume (mmt) 10.2 10.1 12.7 13.2 13.2 13.2
EBIT/kg of sales volumes (Rs/kg) 10.1 13.0 16.5 19.2 21.6 20.7
Source: Company, HDFC Sec Inst Research
Changes In Estimates
FY19E FY20E FY21E
Old New %Ch Old New %Ch Old New %Ch
Crude oil (USD/bbl) 78.0 78.0 - 75.0 75.0 - 75.0 75.0 -
Exchange rate (Rs/USD) 70.1 70.1 - 72.0 72.0 - 72.0 72.0 -
GRM (USD/bbl) 11.0 9.8 (10.9) 11.5 11.5 - 12.0 12.0 -
Petchem margin (Rs/kg)
18.7 19.2 2.9 21.3 21.6 1.4 20.4 20.7 1.5
Revenue (Rs bn) 3,968.8 3,931.5 (0.9) 3,963.7 3,963.7 (0.0) 3,993.1 3,993.1 (0.0)
EBITDA (Rs bn) 613.9 588.5 (4.1) 690.0 690.0 - 709.0 709.0 -
Interest (Rs bn) 56.6 72.9 28.8 46.9 74.5 58.8 37.2 67.3 80.9
Other Income (Rs bn) 95.5 90.1 (5.6) 105.3 98.8 (6.1) 117.1 109.3 (6.6)
APAT (Rs bn) 403.2 372.9 (7.5) 467.8 448.3 (4.2) 493.7 471.5 (4.5)
EPS (Rs/share) 63.7 58.9 (7.5) 73.8 70.8 (4.2) 77.9 74.4 (4.5)
Source: HDFC Sec Inst Research
The changes in estimates factors in a higher interest cost and lower other income
RELIANCE INDUSTRIES : RESULTS REVIEW 3QFY19
Page | 10
SOTP Valuation (Based On Dec-20E) Business EBIDTA (Rs bn) Multiple Value (Rs bn) Value per share Valuation basis
Petrochemicals 333 9.0 2,993 505 EV/EBITDA on Dec 20E
Refining 298 6.5 1,940 328 EV/EBITDA on Dec 20E
E & P
PMT 13 6.0 78 13 EV/EBITDA on Dec 20E
KG D6 54 9 NPV
NEC 25 4 NPV
CBM 24 4 NPV
Shale Gas 4.9 1.0 343 58 x Inv as on Mar-18
Investments in Retail 89.9 20.0 1,798 304 EV/EBITDA on Dec 20E
Investments in Telecom 3,179 537
Consolidated net Debt
(2,549) -430 x as on Dec-20E
Value per share 7,885 1,331
Source: Company, HDFC Sec Inst Research, * Valuation is based on 5.92bn shares (net of treasury shares)
RELIANCE INDUSTRIES : RESULTS REVIEW 3QFY19
Page | 11
Peer Set Comparison
MCap (Rs bn)
CMP (Rs)
RECO TP
(Rs) Upside
%
EPS (Rs/sh) P/E (x) P/BV (x) ROE (%)
FY18 FY19E FY20E FY21E FY18 FY19E FY20E FY21E FY18 FY19E FY20E FY21E FY18 FY19E FY20E FY21E
Reliance Industries 7,191 1,134 BUY 1,331 17 53.1 58.9 70.8 74.4 21.4 19.3 16.0 15.2 2.3 2.1 1.9 1.7 11.1 11.3 12.3 11.7
ONGC 1,861 145 BUY 183 26 15.5 18.3 20.7 21.0 9.3 7.9 7.0 6.9 1.0 0.9 0.9 0.8 10.5 11.8 12.6 12.0
Indian Oil Corp 1,308 138 BUY 155 13 22.1 16.4 18.1 20.8 6.2 8.4 7.6 6.6 1.0 1.0 0.9 0.8 19.9 13.5 13.8 14.5
BPCL 696 354 NEU 335 (5) 41.2 32.0 34.0 36.3 8.6 11.0 10.4 9.7 2.1 1.9 1.7 1.5 25.4 17.4 16.6 15.9
HPCL 372 244 NEU 261 7 41.7 24.9 27.8 32.2 5.9 9.8 8.8 7.6 1.6 1.4 1.3 1.1 28.7 15.1 15.2 15.9
Petronet LNG 336 222 BUY 329 48 13.9 13.6 17.0 20.1 16.0 16.3 13.1 11.1 3.5 3.3 2.9 2.6 23.3 20.4 23.4 24.7
GAIL 751 333 BUY 410 23 20.4 28.5 29.5 31.8 16.3 11.7 11.3 10.5 1.9 1.7 1.5 1.4 11.7 15.1 14.2 14.0
Oil India 196 173 BUY 221 28 23.5 23.8 28.1 28.8 7.4 7.3 6.2 6.0 0.8 0.7 0.7 0.6 9.4 9.2 9.9 9.2
Indraprastha Gas 193 276 BUY 386 40 9.6 10.5 12.7 14.7 28.8 26.4 21.8 18.7 5.4 4.7 4.1 3.6 20.9 19.6 20.7 21.1
Mahanagar Gas 89 900 BUY 1,081 20 48.4 55.3 55.3 57.4 18.6 16.3 16.3 15.7 4.2 3.7 3.3 2.9 24.3 24.3 21.3 19.6
Asian Oil Field Services* 3 83 NA 164 98 5.4 8.3 12.3 16.4 15.3 10.0 6.8 5.1 2.4 1.9 1.5 1.2 23.7 20.1 23.9 25.0
Source: Company, HDFC sec Inst Research, * Fair Price
RELIANCE INDUSTRIES : RESULTS REVIEW 3QFY19
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Standalone Income Statement Rs bn FY17 FY18 FY19E FY20E FY21E
Revenues 2,420.25 2,900.42 3,931.46 3,963.65 3,993.06
Growth % 3.8 19.8 35.5 0.8 0.7
Raw Material 1,645.72 2,020.65 2,822.75 2,755.88 2,747.05
Employee Cost 44.34 47.40 57.83 70.55 86.07
Other Expenses 297.63 314.96 462.33 447.21 450.89
EBITDA 432.56 517.41 588.55 690.02 709.04
EBIDTA Margin (%) 17.9 17.8 15.0 17.4 17.8
EBITDA Growth % 9.9 19.6 13.7 17.2 2.8
Depreciation 84.65 95.80 111.74 116.69 122.40
EBIT 347.91 421.61 476.80 573.33 586.64
Other Income (Including EO Items)
87.09 82.20 90.09 98.84 109.34
Interest 27.23 46.56 72.93 74.47 67.26
PBT 407.77 457.25 493.96 597.70 628.72
Tax 93.52 121.13 121.02 149.42 157.18
RPAT 314.25 336.12 372.94 448.27 471.54
EO (Loss) / Profit (Net Of Tax) - - - - -
APAT 314.25 336.12 372.94 448.27 471.54
APAT Growth (%) 14.8 7.0 11.0 20.2 5.2
AEPS 49.6 53.1 58.9 70.8 74.4
AEPS Growth % 14.8 7.0 11.0 20.2 5.2
Source: Company, HDFC Sec Inst Research
Standalone Balance Sheet FY17 FY18 FY19E FY20E FY21E
SOURCES OF FUNDS
Share Capital 32.51 63.35 63.35 63.35 63.35
Reserves And Surplus 2,850.62 3,083.12 3,399.83 3,780.52 4,180.96
Total Equity 2,883.13 3,146.47 3,463.18 3,843.87 4,244.31
Long-term Debt 787.23 815.96 965.96 865.96 765.96
Short-term Debt 665.00 634.89 705.06 650.76 596.55
Total Debt 1,452.23 1,450.85 1,671.02 1,516.72 1,362.51
Deferred Tax Liability 247.66 279.26 284.85 290.54 296.35
Long-term Provision 21.18 27.09 27.63 28.18 28.75
TOTAL SOURCES OF FUNDS 4,604.20 4,903.67 5,446.68 5,679.32 5,931.92
APPLICATION OF FUNDS
Net Block 1,531.30 2,009.64 2,011.50 2,055.17 2,093.17
Capital WIP 1,341.89 994.83 1,192.65 1,310.69 1,428.79
LT Loans And Advances 104.18 176.99 193.33 197.20 201.14
Total Non-current Investments 1,427.28 1,754.67 1,874.67 1,874.67 1,874.67
Inventories 340.18 395.68 506.24 510.39 514.17
Debtors 54.72 104.60 107.71 108.59 109.40
Cash and Cash Equivalent 536.60 560.08 574.62 585.50 606.77
Other Current Assets 131.31 178.76 235.97 294.18 367.33
Total Current Assets 1,062.81 1,239.12 1,424.55 1,498.66 1,597.68
Creditors 681.61 886.75 861.69 868.75 875.19
Other Current Liabilities & Provns 181.65 384.83 388.33 388.33 388.33
Total Current Liabilities 863.26 1,271.58 1,250.02 1,257.08 1,263.52
Net Current Assets 199.55 (32.46) 174.53 241.59 334.15
TOTAL APPLICATION OF FUNDS 4,604.20 4,903.67 5,446.68 5,679.32 5,931.92
Source: Company, HDFC Sec Inst Research
RELIANCE INDUSTRIES : RESULTS REVIEW 3QFY19
Page | 13
Standalone Cash Flow Year ending March FY17 FY18 FY19E FY20E FY21E
Reported PBT 407.77 457.25 493.96 597.70 628.72
Non-operating & EO Items (69.53) (62.92) (90.09) (98.84) (109.34)
Interest Expenses (8.12) 10.70 72.93 74.47 67.26
Depreciation 84.65 95.80 111.74 116.69 122.40
Working Capital Change 195.33 205.32 (186.32) (49.93) (64.92)
Tax Paid (95.60) (86.15) (121.02) (149.42) (157.18)
OPERATING CASH FLOW ( a ) 514.50 620.00 281.20 490.66 486.94
Capex (302.66) (247.00) (311.43) (278.40) (278.50)
Free Cash Flow (FCF) 211.84 373.00 (30.22) 212.27 208.44
Investments (300.98) (327.39) (120.00) - -
Non-operating Income 87.09 82.20 90.09 98.84 109.34
Others
INVESTING CASH FLOW ( b ) (516.55) (492.19) (341.34) (179.56) (169.16)
Debt Issuance/(Repaid) 30.24 91.44 146.95 (102.99) (102.93)
Interest Expenses 8.12 (10.70) (72.93) (74.47) (67.26)
FCFE 250.20 453.74 43.80 34.81 38.26
Share Capital Issuance 6.92 1.25 - - -
Dividend - (39.16) (56.23) (67.59) (71.10)
FINANCING CASH FLOW ( c ) 45.28 42.83 17.79 (245.04) (241.28)
NET CASH FLOW (a+b+c) 43.23 170.64 (42.34) 66.06 76.50
EO Items, Others (17.56) (19.28) - - -
Closing Cash & Equivalents 536.60 560.08 574.62 585.50 606.77
Source: Company, HDFC Sec Inst Research
Standalone Key Ratios FY17 FY18 FY19E FY20E FY21E
PROFITABILITY %
EBITDA Margin 17.9 17.8 15.0 17.4 17.8
EBIT Margin 14.4 14.5 12.1 14.5 14.7
APAT Margin 13.0 11.6 9.5 11.3 11.8
RoE 11.6 11.1 11.3 12.3 11.7
Core RoCE 26.6 29.5 27.9 29.1 26.8
RoCE 8.5 8.6 9.2 10.0 9.8
EFFICIENCY
Tax Rate % 22.9 26.5 24.5 25.0 25.0
Fixed Asset Turnover (x) 0.5 0.5 0.6 0.6 0.6
Inventory (days) 51 50 47 47 47
Debtor (days) 8 13 10 10 10
Other Current Assets (days) 20 22 22 27 34
Payables (days) 103 112 80 80 80
Other Current Liab & Provns (days) 27 48 36 36 35
Cash Conversion Cycle (days) (51) (75) (37) (32) (25)
Net Debt/EBITDA (x) 2.1 1.7 1.9 1.3 1.1
Net D/E 0.3 0.3 0.3 0.2 0.2
Interest Coverage 16.0 10.8 7.8 9.0 10.3
PER SHARE DATA (Rs)
EPS 49.6 53.1 58.9 70.8 74.4
CEPS 63.0 68.2 76.5 89.2 93.8
Dividend 6.2 6.8 7.6 9.1 9.6
Book Value 455.1 496.7 546.7 606.8 670.0
VALUATION
P/E (x) 22.9 21.4 19.3 16.0 15.2
P/Cash EPS (x) 18.0 16.6 14.8 12.7 12.1
P/BV (x) 2.5 2.3 2.1 1.9 1.7
EV/EBITDA (x) 18.7 15.6 14.1 11.8 11.2
EV/Revenue (x) 3.3 2.8 2.1 2.0 2.0
Dividend Yield (%) 0.5 0.6 0.7 0.8 0.8
OCF/EV (%) 6.4 7.7 3.4 6.0 6.1
FCFF/EV (%) 2.6 4.6 (0.4) 2.6 2.6
FCFE/M Cap (%) 3.5 6.3 0.6 0.5 0.5
Source: Company, HDFC Sec Inst Research
RELIANCE INDUSTRIES : RESULTS REVIEW 3QFY19
Page | 14
RECOMMENDATION HISTORY
Rating Definitions
BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period
Date CMP Reco Target
11-Jan-18 940 BUY 1,003
22-Jan-18 929 BUY 1,080
12-Apr-18 929 BUY 1,102
3-May-18 973 BUY 1,178
9-Jul-18 978 BUY 1,200
29-Jul-18 1,129 BUY 1,270
9-Oct-18 1,108 BUY 1,331
18-Oct-18 1,149 BUY 1,303
9-Jan-19 1,104 BUY 1,303
18-Jan-19 1,134 BUY 1,331
700
800
900
1,000
1,100
1,200
1,300
1,400
1,500
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-1
8
Sep
-18
Oct
-18
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v-1
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c-1
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Jan
-19
Reliance Inds TP
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Disclosure: We,Nilesh Ghuge, MMS & Divya Singhal, 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. 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RELIANCE INDUSTRIES : RESULTS REVIEW 3QFY19
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