Reliance Infrastructure's Q4FY18 results (Outperformer) - Strong Order inflow
Q4FY18 result highlights
- Standalone revenues declined by 11%/6% yoy to Rs21bn/88bn in Q4FY18/FY18. Revenues from EPC business was Rs 4.7bn while power business increased by 3% yoy to Rs20bn in FY18.
- Standalone EBIDTA came in at Rs6.5bn/Rs24.4bn in Q4FY18/FY18, a decline of 11%/7% yoy. Other income during the quarter was 6.5bn/29.6bn, a growth of 224%yoy/24% yoy to Rs6.4bn. As a result, Adj. PAT (standalone) came in at Rs3.3bn, in line with our estimates.
- EPC order book has shown huge traction in Q4FY18/FY18 with an order inflow of Rs100bn/Rs157bn in Q4FY18/FY18, leading to 3.4x jump in order book (Rs205bn) during FY18. Orders were received from different segments of infrastructure - roads, metro, railways and power sector. Note that decline in EPC order book over the years has impacted the standalone business negatively.
- Reliance Power (40% stake) earned a profit of Rs2.5bn/Rs10bn in Q4FY18/FY18 while Reliance Defence (30% stake) posted a loss of Rs4.1bn/Rs10bn in Q4FY18/ (both are associates). Mumbai Metro business reported losses of ~Rs463m/. As a result, Cons. adjusted PAT for Q4FY18/FY18 was Rs1.6bn/Rs13.4bn.
- During the year, Reliance Infra entered into Agreement to sale Mumbai DISCOM to Adani Transmission at EV of Rs188bn (ex. claims, EV is Rs110bn) b) completion of sale of WRSS at a EV of Rs10bn
Key positives: Increase in order book to Rs205bn; L1 in Mumbai Versova sea link at Rs70bn
Key negatives: Delay In INVIT of road assets; Losses at Reliance Naval
Impact on financials: We maintain our earnings estimates for FY19/ FY20
Valuations & view
Reliance Infra as a part of its strategic reorientation plans to sell its road assets through INVIT and has entered into binding agreement to sell Mumbai discom business in order to focus on the capital-light, high RoE defence and EPC business. With the acquisition of Pipavav Offshore and acquisition of 35 industrial licenses, company has made foray into defence business. We believe the focus on defence equipment business, along with steady cash flows from the EPC businesses can create value for shareholders especially as the stock is trading very cheaply at 0.5x FY18 P/BV. Maintain Outperformer
Reliance Energy is primarily engaged in generation, transmission and distribution electricity in India. Co. is also engaged in engaged in a portfolio of services in the power sector in Engineering, Procurement and Construction (EPC) through a network of regional offices in India. Co. operates two business segments: Sale of Electrical Energy and Engineering, Procurement and Construction (EPC) and Contracts. As of Mar 31 2006, Co. had approx. 24.5 million consumers, consisting of approx. 300,000 industrial, approx. 3,400,000 commercial and approx. 21,300,000 residential consumers across an area that spans 124,300 sq. km. in Mumbai, Delhi, Orissa and Goa.
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