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Analyst Research Report Snapshot


Reliance Industries (RIL) - Qtr. Update - dated - April 16, 2013




Axis Capital Limited


17 Apr 2013





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Despite improvement in petchem and refining margins, RIL’s EBITDA declined QoQ on refinery shutdown and lower petchem volumes. However, Q4FY13 PAT at Rs 56 bn was in line with our expectation of Rs 55 bn on higher other income. D6 production continued to decline but retail business EBITDA turnaround was a positive surprise. Outlook  E&P: Decline in D6 production will be addressed through work-over wells but incremental production is unlikely before FY15  Refining: While new capacity additions are likely in Middle East and China, refinery closures in the West should support GRM over 2-3 years  Petchem: Incremental demand from China would support petchem volumes; margins to sustain on high demand and utilization rates Results highlights  RIL reported strong GRM at US$ 10.1/bl vs. US$ 9.6/bl in Q3FY13. Refining throughput declined 8% QoQ to 16.1 mnte  Petchem volumes declined 4% YoY to 2.7 mnte, largely due to shutdown of some polyester facilities  Other income rose 29% QoQ to Rs 22 bn possibly due to higher interest income  FY13 dividend at Rs 9 vs. Rs 7 in FY12  RIL wants a gas pricing framework wherein domestic gas prices are gradually aligned to market prices Valuation and outlook: While operating environment remains volatile, we expect (a) new projects (Petcoke gasification, petchem expansion) over next 3 years and (b) likely improvement in regulatory environment (domestic gas price hike, DGH approval to FDP plans, etc) to drive rerating. Maintain BUY with March ’14 SOTP-based target price of Rs 1,115, which implies 39% upside from CMP of Rs 805. At CMP, the stock trades at 11x FY14E EPS of Rs 73 and 9x FY15E EPS of Rs 91. Key Assumptions: Crude at USD 110/ bbl for FY14 and FY15. INR/USD at 56.5 for FY14 and 58.5 for FY15. Regards, Amit Mishra, CFA (Sr VP – Energy) Institutional Equity Research Axis Capital Limited Tel: +91 22 4325 1142 Prashant Tarwadi (AVP – Energy) Institutional Equity Research Axis Capital Limited Tel: +91 22 4325 1113

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