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Reliance Industries
Reuters: RELI.BO Bloomberg: RIL IN Exchange: BSE Ticker: RELI
Q1FY12 results in line with estimates
Q1FY12 results in line; reiterating Buy on robust downstream margins
RIL’s Q1FY12 reported net profit of INR56.6bn was in line with our estimates.
Management said that it will take 30-36 months to start gas production from new
wells in KG D6. While the KG D6 production ramp-up is likely some time away, we
expect RIL to benefit from robust refining and petrochemical margins. Approval of
the BP deal also benchmarks RIL's E&P valuation and provides downside support.
RIL is trading at 6.9x FY12e EV/EBITDA, at the bottom end of its historical range
and at a 10-15% discount to regional peers. We reiterate Buy.
RIL reports INR56.6bn net profit: +16.7% YoY and +5.3% QoQ
RIL reported EBITDA at INR99.3bn (+6% YoY, +1% QoQ) and net profit at
INR56.6bn, in line with our estimates, but marginally below the consensus. The
refining segment posted strong growth, as GRMs rose to US$10.3/bbl (+41%
YoY, +12% QoQ). However, petrochemicals’ EBIT declined sequentially owing to
margin contraction in the polyester and polymer chains. As expected, oil and gas
profitability fell sequentially owing to lower KG D6 production of gas at
49mmscmd (-18% YoY, -7% QoQ) and liquids at 18k bpd (-30% YoY, -6% QoQ).
RIL trading at inexpensive valuations; BP deal provides downside support
On FY12e, RIL is trading at 6.9x EV/EBITDA, 11.8x P/E, and 1.7x P/BV, which are at
the bottom end of its trading range over the past five years and at a discount to
regional peers. We expect refining and petrochemical margins to be robust and
forecast RIL’s GRM at US$10.5/10.75 per bbl for FY12/13. We expect BP’s
deepwater expertise to help RIL tackle the challenges in KG D6 and accelerate
exploration activities in other prospective blocks, which is not being ascribed any
value by the market. However, delay in the KG D6 gas production ramp-up could
act as an overhang on the stock in the near term.
SOTP-based target price of INR1060; worsening global economy the key risk
Our SOTP-based target price uses 7.2x FY12E EV/EBITDA for refining and
petrochemicals, and DCF (WACC 10.9%) for KG D6 and exploration upside
potential. Risks are 1) a worsening global economy, which could hurt refining and
petrochemical demand; 2) production outages; and 3) policy vagaries.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance Industries
Reuters: RELI.BO Bloomberg: RIL IN Exchange: BSE Ticker: RELI
Q1FY12 results in line with estimates
Q1FY12 results in line; reiterating Buy on robust downstream margins
RIL’s Q1FY12 reported net profit of INR56.6bn was in line with our estimates.
Management said that it will take 30-36 months to start gas production from new
wells in KG D6. While the KG D6 production ramp-up is likely some time away, we
expect RIL to benefit from robust refining and petrochemical margins. Approval of
the BP deal also benchmarks RIL's E&P valuation and provides downside support.
RIL is trading at 6.9x FY12e EV/EBITDA, at the bottom end of its historical range
and at a 10-15% discount to regional peers. We reiterate Buy.
RIL reports INR56.6bn net profit: +16.7% YoY and +5.3% QoQ
RIL reported EBITDA at INR99.3bn (+6% YoY, +1% QoQ) and net profit at
INR56.6bn, in line with our estimates, but marginally below the consensus. The
refining segment posted strong growth, as GRMs rose to US$10.3/bbl (+41%
YoY, +12% QoQ). However, petrochemicals’ EBIT declined sequentially owing to
margin contraction in the polyester and polymer chains. As expected, oil and gas
profitability fell sequentially owing to lower KG D6 production of gas at
49mmscmd (-18% YoY, -7% QoQ) and liquids at 18k bpd (-30% YoY, -6% QoQ).
RIL trading at inexpensive valuations; BP deal provides downside support
On FY12e, RIL is trading at 6.9x EV/EBITDA, 11.8x P/E, and 1.7x P/BV, which are at
the bottom end of its trading range over the past five years and at a discount to
regional peers. We expect refining and petrochemical margins to be robust and
forecast RIL’s GRM at US$10.5/10.75 per bbl for FY12/13. We expect BP’s
deepwater expertise to help RIL tackle the challenges in KG D6 and accelerate
exploration activities in other prospective blocks, which is not being ascribed any
value by the market. However, delay in the KG D6 gas production ramp-up could
act as an overhang on the stock in the near term.
SOTP-based target price of INR1060; worsening global economy the key risk
Our SOTP-based target price uses 7.2x FY12E EV/EBITDA for refining and
petrochemicals, and DCF (WACC 10.9%) for KG D6 and exploration upside
potential. Risks are 1) a worsening global economy, which could hurt refining and
petrochemical demand; 2) production outages; and 3) policy vagaries.
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