MOSL: RELIANCE INDUSTRIES (Neutral)-Better petrochem offsets poor refining performance
RELIANCE INDUSTRIES: Better petrochem offsets poor refining performance
(RIL IN, Mkt Cap USD126.1b, CMP INR1386, TP INR1431, 3% Upside, Neutral)
Reliance Industries’ (RIL) standalone EBITDA declined 6% QoQ (+2% YoY) to INR137b due to a sequential contraction in the refining margin and a fall in petrochem volume. Despite the YoY increase in EBITDA, almost doubling of interest cost resulted in PBT declining by 5% YoY (-5% QoQ). PAT stood at INR85.6b (our estimate: INR84.4b; -2% YoY, -4% QoQ). A better-than-expected performance in the non-core segments resulted in consol. EBITDA of INR208b (our estimate: INR192b; +13% YoY, -2% QoQ). Consol. PAT stood at INR104b (our estimate: INR98b; +10% YoY, flat QoQ). For the full year, standalone EBITDA stood at INR583b (+13% YoY) due to higher volume and margins in the petrochem segment, despite a weaker performance in the refining segment. Consol. FY19 EBITDA stood at INR839.2b (+31% YoY) due to a better contribution from the telecom and retail segments. Consol. PAT stood at INR398.4b (+10% YoY).
- Higher-than-expected GRM: GRM stood at USD8.2/bbl (our estimate: USD8/bbl), as against USD11.0/bbl in 4QFY18 and USD8.8/bbl in 3QFY19; throughput was at 16.0mmt (our estimate: 16.8mmt; -4% YoY, -11% QoQ) due to a planned shutdown in one of the CDUs. Premium over Singapore complex stood at USD5.0/bbl.
- Petrochem volumes decline: Petrochem EBIT grew 23% YoY but declined 2% QoQ due to a shutdown in the PP and LDPE units. EBIT margin improved from 17.2% in 4QFY18 and 17.6% in 3QFY19 to 18.9% in the quarter due to a non-commensurate contraction in margins with respect to prices. On a blended basis, EBITDA/mt stood at USD422 (+10% YoY, +11% QoQ).
- Domestic E&P continues the downtrend: Gas production from KG D6 stood at 1.82mmscmd in the quarter, down from 1.87mmscmd in 3QFY19. CBM production stood at 0.97mmscmd.
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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