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Reliance Industries Ltd. - Q2 FY14 Result update - "ACCUMULATE"




Kisan Ratilal Choksey Shares and Securities Private Limited


30 Oct 2013





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Reliance Industries Ltd. – Q2FY14 Result Update CMP: Rs 867 Target Price: Rs 990 Recommendation: ACCUMULATE “In Line; Petchem segment registers robust performance” Reliance Industries Ltd (RIL) reported net profit of Rs 5490 crs, broadly in line with our expectations of Rs 5450 crs. Net profit improved by 2% on y-o-y basis and 2.65% sequentially, mainly due to robust performance in the petrochemical segment. Net sales improved by 18.4% on Q-o-Q basis and 14.9% on Y-o-Y basis to Rs 103,758 crs, largely due to rupee depreciation, increase in refining and petchem volumes. EBITDA stood at Rs 7,849 crs increased 11% Q-o-Q and 1% Y-oY. The robust petrochemical performance was offset by lower GRM’s (decline of $1.8/bbl YoY) and lower oil and gas production leading to a modest YoY growth in EBITDA. Oil & Gas: 35% dip on Y-o-Y basis and 0.7% growth on Q-o-Q basis in revenue to Rs 1,464 cr is mainly due to fall in production of KG D6 field to the level of 13.8 mmscmd (AvgQ2FY14) and continued natural decline in PMT fields. Oil and gas production from PM fields for the 1HFY14 were down ~17% and ~6% Y-o-Y respectively; these fields are in the natural decline phase. Apart from this the production was also impacted due to shut-down of Mukta A field. In order to ramp-up production over the next three to four years, RIL is focusing on KG D6, NEC-25, Panna-Mukta-Tapti and coal bed methane blocks. The Management Committee (MC) has approved work program and budget ($ 1.2 billion) for the year FY14 to augment production from existing producing fields of KG D6. During the quarter, Appraisal program for MJ1 discovery (D55) was reviewed by Management Committee (MC) of KG-D6 block and the first appraisal well for MJ-A1 was spud in mid-September 2013. Field Development Plan for R- Cluster was approved by MC in August 2013. (Rs in Cr) Q2FY14 Q1FY14 Q2FY13 Q-o-Q Y-o-Y O&G revenue 1464 1454 2254 0.7% -35.0% O&G EBIT 356 352 866 1.1% -58.9% O&G EBIT % 24.32% 24.21% 38.42% Gas output (mmscmd) 13.8 15 28.5 -10.00% -52.63% Source: Company, KR Choksey Research Refining & Marketing: Revenue increased by 19.64% on q-o-q basis and 16.2% on y-o-y basis to Rs 97,456 cr in Q2FY14. Increase in revenue is mainly on account of increase in volume by 3.5% Q-o-Q and 0.6% Y-o-Y and weaker rupee. GRMs stood at $7.7/bbl down ~6.6% on Q-o-Q basis and ~24% on Y-o-Y basis mainly due to lower gasoline cracks. Gasoline cracks in Asia were at $ 9.6/bbl in 2Q FY14 as compared to $ 11.4/bbl in 1Q FY14. (Rs in Cr) Q2FY14 Q1FY14 Q2FY13 Q-o-Q Y-o-Y Refining Revenue 97456 81458 83878 19.64% 16.19% Refining EBIT 3174 2951 3544 7.56% -10.44% Refining EBIT % 3.26% 3.62% 4.23% Crude refined (MMT) 17.7 17.1 17.6 3.51% 0.57% GRM($/bbl) 7.7 8.4 9.5 -6.56% -24.00% Source: Company, KR Choksey Research Petrochemical business: Petrochemical revenues increased 13.4% on Q-o-Q basis and 12.9% on Y-o-Y basis to Rs 24,892 cr in Q2FY14. Revenues increased mainly due to falling rupee, higher volumes and improved deltas from key polymers and fibre intermediates; polyester margins remain weak. EBIT margins improved significantly by 240 bps on Q-o-Q basis and 214 bps on Y-o-Y basis to 1.06% on account of improvement deltas of polymer and fibre intermediaries. However, Polyester markets were affected by the weak economic sentiment. (Rs in Cr) Q2FY14 Q1FY14 Q2FY13 Q-o-Q Y-o-Y Petchem revenue 24892 21950 22058 13.40% 12.85% Petchem EBIT 2504 1888 1740 32.63% 43.91% Petchem EBIT % 10.06% 8.60% 7.89% Petchem...

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