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Reliance Industries (RELI.BO) Rs1,039.95
Equity Research
First Take: 4Q below expectations due to weak refining margins
News
Reliance Industries (RIL) reported 4QFY11 PAT of Rs53.8 bn, up 14% yoy
and below GS/Bloomberg consensus estimate of Rs56.0 bn/Rs54.3 bn.
RIL’s EBITDA of Rs98.4 bn, up 8% yoy, is below our estimate of Rs105.7 bn,
primarily owing to weak refining margins of US$9.2/bbl vs. our estimate of
US$10.5/bbl. Cash profit of Rs88 bn was up 5% yoy. Petchem numbers
were in line, while E&P results were below our estimates. RIL stated that it
has already received US$2 bn of cash from BP, which it will recognize after
its deal with BP receives all regulatory approvals.
Analysis
While the company did incur a refinery shutdown expense of US$0.2/bbl
during the quarter, the adjusted margins still likely imply weaker
correlation to the strong Asian distillate cracks than our current estimates.
In our view, this could impact premium valuations currently commanded
by RIL’s refining division. Moreover, we remain concerned with its E&P
division owing to a lack of clarity around D-6 gas production levels and the
slow progress in exploration acreage. While we view the recent deal with
BP as strategically sound for Reliance – with access to deepwater
technology and a reference point for valuation – we look forward to further
updates on the growth strategy and guidance on D-6 gas volumes over the
medium term. Management also indicated that it would be a challenge to
profitably deploy cash of around US$9.5 bn.
Implications
We place our estimates and price target under review pending further
analysis.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance Industries (RELI.BO) Rs1,039.95
Equity Research
First Take: 4Q below expectations due to weak refining margins
News
Reliance Industries (RIL) reported 4QFY11 PAT of Rs53.8 bn, up 14% yoy
and below GS/Bloomberg consensus estimate of Rs56.0 bn/Rs54.3 bn.
RIL’s EBITDA of Rs98.4 bn, up 8% yoy, is below our estimate of Rs105.7 bn,
primarily owing to weak refining margins of US$9.2/bbl vs. our estimate of
US$10.5/bbl. Cash profit of Rs88 bn was up 5% yoy. Petchem numbers
were in line, while E&P results were below our estimates. RIL stated that it
has already received US$2 bn of cash from BP, which it will recognize after
its deal with BP receives all regulatory approvals.
Analysis
during the quarter, the adjusted margins still likely imply weaker
correlation to the strong Asian distillate cracks than our current estimates.
In our view, this could impact premium valuations currently commanded
by RIL’s refining division. Moreover, we remain concerned with its E&P
division owing to a lack of clarity around D-6 gas production levels and the
slow progress in exploration acreage. While we view the recent deal with
BP as strategically sound for Reliance – with access to deepwater
technology and a reference point for valuation – we look forward to further
updates on the growth strategy and guidance on D-6 gas volumes over the
medium term. Management also indicated that it would be a challenge to
profitably deploy cash of around US$9.5 bn.
Implications
We place our estimates and price target under review pending further
analysis.
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