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UBS Investment Research
Reliance Industries
Q3FY11: Upstream disappoints
„ Q3FY11 results: below expectations
3QFY11 EBITDA at Rs95bn was higher by 2% QoQ, but 6% below UBSe of
Rs101bn. PAT of Rs51bn was up 4% QoQ, boosted by higher other income which
grew 10% QoQ. PAT below UBSe of Rs53bn. Lower numbers on lower volumes
at the KG D6 fields.
„ Oil and gas contribution declines, partially offset by refining & petchem
Upstream EBIT was down 12% qoq to Rs15bn and is the key reason for the miss.
Refining EBIT was up 11.1% QoQ – GRM at US$9.0/bbl, was modestly higher
than our estimates. Petrochemicals EBIT was up 10.6% QoQ on strong global
margins led by the aromatics chain (PX and polyester). We expect modest
improvement in refining and petchem margins going forward.
„ KG D6 volume decline confirmed by results, no guidance
Company says will try to resolve the gas volume issue, no guidance. However it
did say that KGD6 volumes have declined from peak of 57mmscmd current levels
of 43-45. We currently have 60mmscmd (52 from D6+8 from MA field). Every
10mmscmd decline will hit pretax earnings by c5%. No change to our numbers yet
„ Valuation: Maintain Neutral rating
We base our Rs1,150 price target on a sum-of-the-parts valuation. Currently the
stock is trading at 8.0x FY12e EV/EBITDA and 14.1x FY12e PE. Despite our
modestly positive view on refining and petchem, upstream will drag earnings
down. Stock expensive vs peers, maintain Neutral
Q Reliance Industries
Reliance Industries (RIL) is the largest integrated oil and gas company in India.
Its three main businesses are exploration & production, refining and
petrochemicals. Its two refineries in Jamnagar, Gujarat have among the highest
complexity globally and a combined capacity of 1mbpd. The company's FY10
turnover was US$46bn. It derives more than 50% of its revenue from exports.
Q Statement of Risk
We believe gas volumes from KG-D6 are key drivers of the stock’s performance.
Refining and petrochemical margins are also major drivers of the company’s
earnings.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Reliance Industries
Q3FY11: Upstream disappoints
„ Q3FY11 results: below expectations
3QFY11 EBITDA at Rs95bn was higher by 2% QoQ, but 6% below UBSe of
Rs101bn. PAT of Rs51bn was up 4% QoQ, boosted by higher other income which
grew 10% QoQ. PAT below UBSe of Rs53bn. Lower numbers on lower volumes
at the KG D6 fields.
„ Oil and gas contribution declines, partially offset by refining & petchem
Upstream EBIT was down 12% qoq to Rs15bn and is the key reason for the miss.
Refining EBIT was up 11.1% QoQ – GRM at US$9.0/bbl, was modestly higher
than our estimates. Petrochemicals EBIT was up 10.6% QoQ on strong global
margins led by the aromatics chain (PX and polyester). We expect modest
improvement in refining and petchem margins going forward.
„ KG D6 volume decline confirmed by results, no guidance
Company says will try to resolve the gas volume issue, no guidance. However it
did say that KGD6 volumes have declined from peak of 57mmscmd current levels
of 43-45. We currently have 60mmscmd (52 from D6+8 from MA field). Every
10mmscmd decline will hit pretax earnings by c5%. No change to our numbers yet
„ Valuation: Maintain Neutral rating
We base our Rs1,150 price target on a sum-of-the-parts valuation. Currently the
stock is trading at 8.0x FY12e EV/EBITDA and 14.1x FY12e PE. Despite our
modestly positive view on refining and petchem, upstream will drag earnings
down. Stock expensive vs peers, maintain Neutral
Q Reliance Industries
Reliance Industries (RIL) is the largest integrated oil and gas company in India.
Its three main businesses are exploration & production, refining and
petrochemicals. Its two refineries in Jamnagar, Gujarat have among the highest
complexity globally and a combined capacity of 1mbpd. The company's FY10
turnover was US$46bn. It derives more than 50% of its revenue from exports.
Q Statement of Risk
We believe gas volumes from KG-D6 are key drivers of the stock’s performance.
Refining and petrochemical margins are also major drivers of the company’s
earnings.
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