MOSL: RELIANCE INDUSTRIES (Buy)-Consumer businesses drive the quarter-Debt & Capex moderating
RELIANCE INDUSTRIES: Consumer businesses drive the quarter; Debt & Capex moderating
(RIL IN, Mkt Cap USD126.1b, CMP INR1415, TP INR1630, 15% Upside, Buy)
Reliance Industries (RIL) reported in-line standalone revenue of INR871.4b (-9% YoY, flat QoQ) in 2QFY20. EBITDA came in at INR136.7b (-8% YoY, flat QoQ) versus our estimate of INR136.4b owing to the lower-than-expected refinery throughput of 16.7mmt, despite a better GRM of USD9.4/bbl (flat YoY, +16% QoQ). Lower depreciation, combined with higher other income and higher interest cost, resulted in a beat of 9% in standalone PAT of INR97.0b (+10% YoY, +7% QoQ).
The company recognized the entire MAT cut in the quarter with an effective tax rate of 20.8% versus 25.4% in 1QFY20.
At the consolidated level, RIL reported EBITDA of INR221.5b (our estimate: INR213.2b; +5% YoY, +4% QoQ), primarily led by the better-than-expected performance of the digital and retail segments. Higher other income led to consol. PAT of INR113.5b (+19% YoY, +12% QoQ; our estimate: INR107.8b). In 2QFY20, the tax rate on a consolidated basis stood at 24.7% versus 29.5% in the previous quarter, as the company maintained an effective tax rate of ~35% for retail and Jio.
In 1HFY20, standalone EBITDA was down 9.1% YoY to INR273.1b, while PAT was up 6% YoY at INR187.4b, led by a lower tax rate of ~12% YoY. Consolidated EBITDA increased 4.1% YoY to INR434.7b, while PAT was up 12.9% YoY to INR214.9b.
Better-than-expected GRM negated by lower throughput: Refining EBIT stood at INR49.2b (-5% YoY, +11% QoQ).
- The premium to SGRM reduced to USD2.9/bbl (v/s USD3.4 in 2QFY19 and USD4.6 in 1QFY20) as the company had a lower gasoline and FO yield, which primarily drove the improvement in SGRM. Also, the increase in prices of heavy crude had an adverse impact.
- GRM stood at USD9.4/bbl (our estimate: USD8.7/bbl), as against USD9.5/bbl in 2QFY19 and USD8.1/bbl in 1QFY20. Throughput was at 16.7mmt (our estimate: 17.0mmt; -6% YoY, -5% QoQ).
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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