EUR 120.00 For Business Accounts Only

MOSL: RELIANCE INDUSTRIES (Neutral)-Better throughput offsets poor GRMs

RELIANCE INDUSTRIES: Better throughput offsets poor GRMs

(RIL IN, Mkt Cap USD115b, CMP INR1249, TP INR1400, 12% Upside, Neutral)

 

RIL reported in-line standalone revenue of INR883b (-3% YoY, +6% QoQ) in 1QFY20. Although EBITDA of INR136b was in line with our estimate, it declined 10% YoY (flat QoQ) due to much poorer GRM of USD8.1/bbl v/s USD10.5/bbl in the year-ago period. Despite the contraction in most petrochem margins, RIL’s petrochem segment delivered 2% YoY (+7% QoQ) growth in implied EBITDA/mt (USD). Much lower depreciation, combined with higher-than-expected other income and lower effective interest cost, resulted in a beat of 12% in standalone PAT of INR90.4b (+2% YoY, +6% QoQ). At the consol. level, RIL reported EBITDA of INR213b (our estimate: INR201b; +3% YoY, +2% QoQ), primarily led by better-than-expected performance by the digital and retail segments. Much lower depreciation than expected resulted in consol. PAT of INR101b (our estimate: INR89b; +7% YoY, -3% QoQ).

• Lower-than-expected GRM: GRM stood at USD8.1/bbl (our estimate: USD8.5/bbl), as against USD10.5/bbl in 1QFY19 and USD8.2/bbl in 4QFY19. Throughput was at 17.5mmt (our estimate: 17.5mmt; +5% YoY, +9% QoQ). Premium over Singapore complex stood at USD4.6/bbl.
• Petrochem volumes decline: Petrochem EBIT declined 5% YoY/QoQ to INR74b, primarily driven by lower volumes. However, implied EBITDA (USD/mt) was higher at USD424/mt v/s USD412/mt in 4QFY19 (USD437/mt in 1QFY19), despite a contraction in most petrochem margins, due to better optimization of feedstock.
• Domestic E&P continues downtrend: Gas production from KG D6 stood at 1.76mmscmd in the quarter, down from 1.82mmscmd in 4QFY19. CBM production stood at 0.93mmscmd.
• RJio's ARPU falls but EBITDA improves: RJio added 8.2m net subscribers, indicating a relative slowdown in the pace of addition over the past few quarters. This apart, ARPU was down 3.3% QoQ to INR122 (our estimate: INR126). Revenue increased 5% QoQ to INR116.8b, while EBITDA was up 5% QoQ to INR46.7b - an 18% beat on account of lower-than-expected operating expenses. Margins expanded 100bp QoQ to 40% (our estimate: 32.8%), helped by lower opex. PAT grew 6.1% QoQ to INR8.9b (our estimate: INR1.4b). Subscriber churn was at 0.97% (v/s 0.75% in 4QFY19).