MOSL: RELIANCE INDUSTRIES (Buy)-Petchem drives standalone profitability-RJio ARPU declines
RELIANCE INDUSTRIES: Petchem drives standalone profitability; RJio ARPU declines
(RIL IN, Mkt Cap USD82.1b, CMP INR995, TP INR1150, 16% Upside, Buy)
Reliance Industries’ (RIL) 4QFY18 standalone EBITDA increased 19% YoY (-2% QoQ) to INR134b, below our estimate of INR149b, due to lower throughput of 16.7mmt (our estimate: 17.8mmt). GRM of USD11.0/bbl was also below our estimate of USD11.4/bbl. PAT rose 7% YoY (+3% QoQ) to INR87b, benefiting from higher other income of INR26b (our estimate: INR17b) and lower depreciation of INR27b (our estimate: INR33b). Standalone PAT for the year stood at INR336b, +7% YoY. Consolidated PAT stood at INR361b, +20.9% YoY led by contribution from RJio.
- Lower throughput impacts refining performance: Refining EBIT stood at INR55.9b (-11% YoY, -8% QoQ), with GRM of USD11.0/bbl (our estimate: USD11.4/bbl; -4% YoY, -5% QoQ) and throughput of 16.7mmt (our estimate: 17.8mmt; -5% YoY, -6% QoQ) due to maintenance activities. Premium over Singapore complex stood at USD4.0/bbl.
- Robust volume growth and healthy deltas drive profitability: Petchem EBIT grew 84% YoY (+12% QoQ) to INR63.4b, led by favorable margins and strong volume growth. EBIT margin of 17% was higher than 14% in 4QFY17, primarily due to the strengthening of PP, intermediates and polyester chain deltas. Production volumes were higher due to ramp up of ROGC; volume growth is expected to remain strong going ahead as well.
- Domestic E&P continues to shrink: RIL reported E&P EBIT loss of INR4.2b v/s loss of INR780m in 4QFY17 and loss of INR910m in 3QFY18. KG-D6 gas production declined to 4.3mmscmd (-42% YoY, -14% QoQ). Shale gas production was down to 28.7bcfe (-27% YoY,-11% QoQ) due to natural decline and temporary shut-in of wells. CBM production stood at 1.04mmscmd.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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