Reliance Industries' Q3FY19 results (Outperformer) - Stellar all-round performance
Q3FY19 result highlights
- RIL reported consol PAT of Rs103.8bn (up 10% yoy), ahead of IDFCe Rs94.3bn, driven by strong operating results in petchem, retail and higher than estimated refining EBIT. RJio earnings growth continues to remain strong.
- Despite reporting a 4-year low GRM of US$8.8/bbl (in line). Refining segment reported a higher than estimated EBIT of Rs50bn vs IDFCe Rs45bn led by higher volumes and lower costs. (Q2FY19 /Q3FY18 GRMs at US$9.5/11.6 per bbl respectively).
- Jio revenue/EBITDA of Rs103.8bn/40.5bn vs IDFCe Rs103/39.8bn and subscriber base of 280.1mn was also in line with estimate. ARPU of Rs130 was marginally higher than estimates.
- RIL’s petchem EBIT of Rs82.2bn was at a record high, growing 43% yoy. EBITDA of Rs95.6bn (+36.8% yoy) and margins of +20.7% flat yoy.
- Gross debt of Rs2.7trn, Net debt of Rs1.9trn (excluding suppliers credit of Rs820bn)
Key positives: Very strong operational performance led by Petchem, Jio and retail segments. Higher than expected earnings from the refining segment.
Key Negatives: Low GRMs and higher interest costs.
Impact on financials: Reduced FY19/20/21E EPS by 1.5/1.3/5.4% to factor lower refining margins and higher interest costs. TP remains unchanged
Valuations & View- momentum continues
RIL has now reported a double digit yoy earnings increase for 8 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. As per management vision for the next 5 years, the ~Rs99bn (EBITDA contribution from Retail + Jio) from non-energy 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 19% in EPS over FY18-21E and significant SOTP contribution of the retail/telecom business in our revised TP of Rs1310/sh, 15% 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.
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