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4QFY11 results
Reliance’s 4QFY11 net profit rose 5%QoQ to Rs53.76bn – 3% below estimate.
Losses in organised retail and writeoffs in international E&P pulled FY11 consol net
profit 5% below standalone. While upgrading our crude, refining and petchem
margin forecasts, we are lowering our FY12/13 KGD6 gas production estimate to
48/53mmscmd, resulting in +4%/-2% change in FY12/13 EPS. However, EPS
based on spot prices has ranged 10-27% above our FY12 estimate in last month.
Continuation of this strength in downstream may stem consensus downgrades
which have coincided with three years of stock underperformance. Maintain BUY.
4QFY11 net profit +5%QoQ. Reliance’s 4QFY11 net profit rose 14%YoY/5%QoQ to
Rs53.76bn (Rs16.4/sh) - 3% below our estimate. Petchem Ebit was 5% ahead of our
estimates as higher margins offset lower than anticipate volumes (-6%). However,
disappointing GRMs (US$9.2/bbl, +US$0.2 QQ) and higher than expected costs driven
by shutdown expenses of Rs1.2bn, pulled down reported refining Ebit (Rs64.6bn,
+6%QoQ) 5% below estimate. Interest expenses (Rs7bn, +27%QQ) were higher than
expected but was offset by higher than expected other income (Rs9.2bn) and lower tax
rate (19.5%), ensuring that the miss 4QFY11 EPS was limited to 3% from our forecast.
FY11 consol net 4% below standalone. While Reliance’s standalone FY11 net profit
(Rs203bn, Rs62/sh) rose 25%YoY, its consolidated PAT came in 5% lower primarily due
to a Rs9.2bn write-off related to its international E&P subsidiaries. Pre-exceptional PAT
was only 1% below standalone as better performance of Recron Malaysia (polyester)
and Gapco (petro-marketing) as well as a rise in non interest other income (Rs9.2bn)
largely offset losses in other business (EBIT loss of Rs4.6bn, primarily organised
retail). Production from Reliance’s shale gas JVs (Atlas and Pioneer) commenced from
4QFY11. Reliance also announced its first gas find in Cambay basin block CY-D6.
Changing EPS estimates. In line with new macro forecasts of our global team, we
are upgrading our FY12/13 estimate for Reliance’s crude price, refining and petrochem
margin. However, we are cutting our KGD6 gas production estimate for FY12 from 53
to 48mmscmd and a sharper cut in FY13 from 63 to 53mmscmd. These changes lead
to a +4%/-2% change in FY12/FY13 EPS. With limited E&P production growth, our
FY12-13 earnings growth forecast now depends solely on higher downstream margins.
Stemming of consensus downgrades likely. With the recent BP deal setting a base
benchmark for Reliance’s upstream valuations, focus should shift to better performing
refining and marketing. Relevantly, FY12 EPS based on spot prices has ranged between
Rs81-95 (10-27%> base case) in the last month. This underscores that continuation of
the current robust margin environment may stem and reverse the EPS downgrade
cycle that has led to three years of underperformance. Maintain BUY (+8%).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
4QFY11 results
Reliance’s 4QFY11 net profit rose 5%QoQ to Rs53.76bn – 3% below estimate.
Losses in organised retail and writeoffs in international E&P pulled FY11 consol net
profit 5% below standalone. While upgrading our crude, refining and petchem
margin forecasts, we are lowering our FY12/13 KGD6 gas production estimate to
48/53mmscmd, resulting in +4%/-2% change in FY12/13 EPS. However, EPS
based on spot prices has ranged 10-27% above our FY12 estimate in last month.
Continuation of this strength in downstream may stem consensus downgrades
which have coincided with three years of stock underperformance. Maintain BUY.
4QFY11 net profit +5%QoQ. Reliance’s 4QFY11 net profit rose 14%YoY/5%QoQ to
Rs53.76bn (Rs16.4/sh) - 3% below our estimate. Petchem Ebit was 5% ahead of our
estimates as higher margins offset lower than anticipate volumes (-6%). However,
disappointing GRMs (US$9.2/bbl, +US$0.2 QQ) and higher than expected costs driven
by shutdown expenses of Rs1.2bn, pulled down reported refining Ebit (Rs64.6bn,
+6%QoQ) 5% below estimate. Interest expenses (Rs7bn, +27%QQ) were higher than
expected but was offset by higher than expected other income (Rs9.2bn) and lower tax
rate (19.5%), ensuring that the miss 4QFY11 EPS was limited to 3% from our forecast.
FY11 consol net 4% below standalone. While Reliance’s standalone FY11 net profit
(Rs203bn, Rs62/sh) rose 25%YoY, its consolidated PAT came in 5% lower primarily due
to a Rs9.2bn write-off related to its international E&P subsidiaries. Pre-exceptional PAT
was only 1% below standalone as better performance of Recron Malaysia (polyester)
and Gapco (petro-marketing) as well as a rise in non interest other income (Rs9.2bn)
largely offset losses in other business (EBIT loss of Rs4.6bn, primarily organised
retail). Production from Reliance’s shale gas JVs (Atlas and Pioneer) commenced from
4QFY11. Reliance also announced its first gas find in Cambay basin block CY-D6.
Changing EPS estimates. In line with new macro forecasts of our global team, we
are upgrading our FY12/13 estimate for Reliance’s crude price, refining and petrochem
margin. However, we are cutting our KGD6 gas production estimate for FY12 from 53
to 48mmscmd and a sharper cut in FY13 from 63 to 53mmscmd. These changes lead
to a +4%/-2% change in FY12/FY13 EPS. With limited E&P production growth, our
FY12-13 earnings growth forecast now depends solely on higher downstream margins.
Stemming of consensus downgrades likely. With the recent BP deal setting a base
benchmark for Reliance’s upstream valuations, focus should shift to better performing
refining and marketing. Relevantly, FY12 EPS based on spot prices has ranged between
Rs81-95 (10-27%> base case) in the last month. This underscores that continuation of
the current robust margin environment may stem and reverse the EPS downgrade
cycle that has led to three years of underperformance. Maintain BUY (+8%).
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