15 June 2015

Reliance Industries - Grandiose Plans Begin to Rollout....:: Edelweiss

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Mr. Mukesh Ambani’s, CMD, Reliance Industries (RIL), AGM speech primarily focused on specific timelines for commercialising its INR2tn capex. The pace of spending and implementation has significantly picked up with half (INR1tn) of the capex spent in FY15 itself. All the projects will be fully completed within the next 12-18 months and more specifically Reliance Jio (RJio) will attain commercial launch by December 2015. It will cover 80% of India’s population by year end and 100% within 3 years (versus 86% by Bharti currently, which is mainly 2G). It plans to make INR4,000 handsets available by December 2015. Notably, the market is assigning a 40-50% (USD6.5bn) discount to RIL’s USD13-14bn RJio spending, thereby giving a “negative” equity value for the business, which could surprise positively. We believe RIL presents "Growth at Reasonable Price (GARP)", with earnings poised to double, while valuations are at near multi-year lows.
Capex programme on track; grandiose RJio roll out
RJio already has installed capacity of 250,000 R kms fiber and it will be doubling it in 2 years time. RJIO has installed capacity for 100mn wireless customers and 20mn fiber customers. It also expects to connect to 1mn homes (last mile) by fiber by April 2016. Core capex programme remains on track: Post-expansions in a year, RIL will not only become the world’s second largest paraxylene (PX), 5th largest PTA and largest polyester producer, but its off-gas crackers’ capex is even lower than that of highly competitive US crackers. Notably, the petcoke project is expected to save nearly USD1.5bn p.a. by substituting imported LNG with petcoke.
Organised retail fueled by e-commerce
RIL is planning to boost revenue in retail by 30-50% p.a. from 30% CAGR over past 5 years, increase its reach from 200 to 900 cities by 2016 and roll out an unparalleled e-commerce initiative to leverage its existing sourcing and distribution backbone.


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