Reliance Industries' Q2FY19 results (Outperformer) - Scale continues to build
Q2FY19 result highlights
- RIL reported consol PAT of Rs95bn (up 18% yoy), in line with estimates (Rs96bn), driven by strong operating results in petchem and a better than estimated EBIT of Rs20.4bn in the telecom business vs estimates of 17.9bn (even as EBITDA of Rs35.7was broadly in line).
- Refining segment disappointed however, with GRMs of US$9.5/bbl (IDFCe US$10.3bbl, Q1FY19 and Q2FY18 GRMs at US$10.5/12 respectively). Thruput at 17.7mt, in line
- Jio revenue/EBITDA of Rs92.4/35.7bn vs IDFCe Rs90/35bn. Subscriber base of 252mn and ARPU of ~Rs132 were both ahead of estimates for the quarter of 245mn/Rs130 ARPU.
- Petchem EBIT of Rs81.2bn was another record high, growing 64% yoy. EBITDA of Rs94.8bn (+56% yoy) and margins of 21.7% flat yoy.
- Gross debt of Rs2.6trn, Net debt of Rs2.6trn (including Rs800bn suppliers credit)
Key positives: Strong Petchem metrics, Jio beat and strong retail results.
Key Negatives: Lower GRMs and higher interest costs.
Impact on financials: FY19/20E EPS estimates tweaked marginally, with lower refining estimates offset by stronger Petchem/telecom/retail estimates. Target price lowered to 1310 (1350) to factor higher debt.
Valuations & View- strong momentum ahead
RIL has now reported a double digit yoy earnings increase for 7 consecutive quarters, with the massive ~US$70bn investment in downstream + Telecom+ other business in last 5 years starting to deliver material operating traction for the company. The RIL Chairman had in the AGM articulated his ambition to make the non-energy business equivalent to energy business contribution to the business in the next 5-10 years. This implies that the ~Rs99bn (EBITDA contribution from Retail + Jio) from these businesses in FY18 is targeted to grow 8x over the next 7-8 years to match the estimated energy business EBITDA of Rs775-800bn by then. We continue to build material growth across the telecom/retail businesses over the next 3 years, with our revised estimates pointing to a CAGR of 22% in EPS over FY18-21E and significant SOTP contribution of the retail/telecom business in our revised TP of Rs1310/sh, 14% upside. Reiterate outperformer
Reliance Industries is primarily engaged in the production and market of petrochemical products, and refinery and retail of petroleum and LPG. Co.'s petrochemical products include polymer - polypropylene (PP), polyethylene (PE), poly vinyl chloride (PVC); polyester - polyester filament yarn (PFY), polyester staple fiber (PSF), polyethylene terephthalate (PET); polyester intermediates - paraxylene (PX), purified terephthalic acid (PTA), mono-ethylene glycol (MEG); and cracker products - ethylene, propylene and aromatics. Co. is also engaged in the manufacture of RELAB and textiles. Co.'s textile products are sold under the brand names: Only Vimal, Harmony, Reance, RueRel and V2.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.