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MOSL: Morning India (18/January/19): 1. Reliance Industries (Refinery margin boosted by crude optimization); 2. HUL; 3. Aurobindo Pharma; 4. AU Small Finance; 5. Federal Bank; 6. Cyient; 7. Financials

MOrning India (18/January/19): 1. Reliance Industries (Refinery margin boosted by crude optimization); 2. HUL; 3. Aurobindo Pharma; 4. AU Small Finance; 5. Federal Bank; 6. Cyient; 7. Financials

 

Today’s top research idea

Reliance Industries: Refinery margin boosted by crude optimization, secondary units' performance

• RIL surprised on refining margin with GRM of USD8.8/bbl v/s USD11.6/bbl in 3QFY18 and USD9.5/bbl in 2QFY19, a spread of USD4.5/bbl over Singapore GRM.
• Petrochem production was the highest ever at 9.7mmt. However, petrochem EBIT margin has continued its slide since 1QFY19 to 17.6% in 3QFY19. The outlook on both refining and petrochem remains muted in light of poor global demand and upcoming capacities.
• Gross debt increased sequentially with capex of INR270b in 3QFY19 and INR998b in 9MFY19 for FY19.
• We cut our FY20E EPS from INR86 to INR74, aligning with the high capex, which would result in lower other income and higher interest cost. We value refining and petrochem at 7.5x Dec'20E EBITDA. We value RJio using DCF and retail at 2.5x Dec'20E sales. With a revised target price of INR1,426, we reiterate our Buy rating

Piping hot news

Aurobindo buys oncology portfolio for $300 million

• Aurobindo Pharma on Thursday said it was acquiring a portfolio of seven marketed oncology injectable products, intellectual property and commercial infrastructure from Nasdaq-listed Spectrum Pharmaceuticals based in the U.S. The acquisition is for an upfront purchase price of $160 million in cash and up to $140 million on achieving regulatory and sales-based milestones, said the Hyderabad-headquartered drug maker, which is making the acquisition through a step-down subsidiary.