MOSL: RELIANCE INDUSTRIES (Buy)-Petchem drives standalone profitability-RJio turns profitable

Reliance Industries: Petchem drives standalone profitability; RJio turns profitable

(RIL IN, Mkt Cap USD82.1b, CMP INR929, TP INR1069, 15% Upside, Buy)

Reliance Industries’ (RIL) 3QFY18 standalone EBITDA increased 30% YoY (+6% QoQ) to INR137b, below our estimate of INR146b, due to marginally lower throughput of 17.7mmt (our estimate: 18.3mmt). GRM of USD11.6/bbl was in line with our estimate, though. PAT rose 5% YoY (+2% QoQ) to INR84.5b, benefiting from lower interest expense of INR10.9b (our estimate: INR14b – a miss due to forex gain of INR920m) and lower depreciation of INR24.8b (our estimate: INR29b).

• Lower throughput impacts refining performance: Refining EBIT stood at INR60.8b (-1% YoY, -7% QoQ), with GRM of USD11.6/bbl (in-line; +7% YoY, -3% QoQ) and throughput of 17.7mmt (our estimate: 18.3mmt; -1% YoY, -2% QoQ). GRM premium over Singapore complex stood at USD4.3/bbl.
• Robust volume growth and healthy deltas drive profitability: Petchem EBIT grew 68% YoY (+15% QoQ) to INR56.6b, led by a favorable margin and strong volume growth. EBIT margin of 17% was higher than 15% in 3QFY17, primarily due to the strengthening of PP, intermediates and polyester chain deltas.
• ROGC commissioned: ROGC has been commissioned successfully, and was fully operational in December 2017. It has achieved designed throughput levels during the quarter. Out of the 10 petcoke gasifiers, four are expected to start by March 2018 and the rest in FY19.