Reliance Industries - Yet Another Positive Surprise; Result Update Q2FY15 :: Edelweiss PDF link

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Reliance Industries (RIL) once again surpassed our forecast, this time by 4% to attain consol PAT of INR59.7bn (up 1.7% YoY, 0.3% QoQ) for Q2FY15. RIL’s GRMs rose by USD0.6/bbl YoY as light-heavy crude oil spreads increased and higher-margin domestic sales jumped. Furthermore, RIL gained from strong polymer and aromatic margins, and growth in shale and retail earnings. While polyester margin plunged, KG-D6 volumes held steady. The stock quotes at a near all-time low PBV of 1.3x FY15E, despite earnings poised to double over 5 years.

GRMs surprise, Petchem flat

Singapore complex GRMs fell by USD0.4/bbl YoY to USD4.8/bbl as middle distillate crack spreads dipped. In contrast, RIL’s GRMs gained by USD0.6/bbl to USD8.3/bbl, as RIL’s highly complex refinery took advantage of a widening in L-H crude oil spreads by USD1/bbl and its higher-margin domestic sales jumped 48% YoY. The company shall restart 250 of its directly owned gas stations (from a total of ~1,400) soon on diesel deregulation. The USD2.5/bbl GRM-enhancing new petcoke facility will start in H2FY16. Large unplanned global outages firmed up polymer and aromatic (Px, PTA) margins, while polyester margin tumbled on weak demand. Overall petchem EBIT was flat YoY. RIL’s massive petchem start-ups are coinciding with modest domestic demand revival.

Shale continues to grow, while KG-D6 awaits pricing clarity

RIL’s shale EBITA rose 55% YoY as volumes grew 36%, while average realisations declined by 8%. Higher volumes and cost cuts will drive further growth. KG-D6 production drop slowed-down due to commissioning side-track wells. MJ-A3 well appraisal and R-cluster tendering are underway. Unleashing USD8-10bn capex awaits the government’s gas price announcement. CBM is on track for first gas in mid-FY16. Organised retailing EBIT gained 41% YoY as like-for-like store sales moved up 21% YoY.

LINK
https://www.edelweiss.in/research/Braveheart-Series-Reliance-Industries--Yet-Another-Positive-Surprise;-Result-Update-Q2FY15/27246.html