new results review 3qfy19 18 jan 2019 reliance industries industries... · 2019. 1. 18. · in...

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters

RESULTS REVIEW 3QFY19 18 JAN 2019

Reliance Industries

BUY

.

Sailed through a tough time In 3QFY19, RIL proved itself yet again largely owing to better petchem margins and volumes, despite weaker GRMs. Petchem EBIT/kg stood at Rs 20.7/kg, up 16.3% YoY. This expansion of margins was owing to a better product mix and use of US ethane/refinery off-gases as a feedstock. Petchem production volumes were up 21.3% YoY to 9.7mmt, with the refinery off gas cracker (ROGC) ramping up. The performance of the refining segment was subdued. GRM was USD 8.8/bbl owing to volatility in crude oil prices, and weak light distillates spread. Q3 EBITDA and PAT stood at Rs 145.07bn and Rs 89.28bn respectively, each up 5.6% YoY.

The International Maritime Organisation (IMO) has revised its bunker sulfur regulations, which will be implemented from Jan-20. This will result in (1) Higher Gasoil and LSFO demand (2) Widening of the L-H differential. In turn, resulting in higher GRMs in FY20/21 for Indian refiners who have higher share of middle distillates in their production mix.

Post stabilization of the ROGC and Px plants, petrochemical output achieved a peak volume of 9.7mmt in 3Q. While cracker margins could see near-term pressure on commissioning of new units in the US, integration and cost efficiencies from recent

projects should enable RIL to continue to post healthy margins.

Our SOTP-based target for RIL is Rs 1,331/sh based on Dec-20 earnings (6.5x EV/e for standalone refining, 9x EV/e for petchem, Rs 6.0/sh for domestic E&P, 1x EV/invested capital for Shale, 20x EV/e for Retail and 10x EV/e for Telecom. Maintain BUY. (Refer our note on Reliance Jio)

Highlights of the quarter

Refining: GRM stood at USD 8.8/bbl (-24.1% YoY, -7.4% QoQ). The sequential decline is owing to the lower light distillates cracks. The premium over Singapore GRMs widened to USD 4.5/bbl (vs. USD 3.4 in 2QFY19).

Petchem: Px and PTA margins were strong during the quarter. Px/PTA margins were up +75/+46% YoY. Petcoke gasifier stabilization is in-progress, which is expected to be completed by Mar-19.

Oil & Gas: Revenue was down 19.8% YoY, despite realization being up 54% owing to ~34% decline in production. Average gas production from KGD6 was 1.87mmscmd (-62% YoY, -46% QoQ).

Near term outlook: We expect the GRM to be higher owing to IMO specification changes which will support middle distillate cracks.

FINANCIAL SUMMARY (Standalone) Year Ending March (Rs bn) 3QFY19 3QFY18 YoY(%) 2QFY19 QoQ (%) FY18 FY19E FY20E FY21E Net Sales 1,000.96 732.56 36.6 961.67 4.1 2,900.42 3,931.46 3,963.65 3,993.06 EBITDA 145.07 137.44 5.6 148.92 (2.6) 517.41 588.55 690.02 709.04 PAT 89.28 84.54 5.6 88.59 0.8 336.12 372.94 448.27 471.54 Diluted EPS (Rs) 13.7 13.3 3.1 13.6 0.8 53.1 58.9 70.8 74.4 P/E (x) 21.4 19.3 16.0 15.2 EV / EBITDA (x) 15.6 14.1 11.8 11.2 RoE (%) 11.1 11.3 12.3 11.7 Source: Company, HDFC sec Inst Research

INDUSTRY OIL & GAS

CMP (as on 17 Jan 2019) Rs 1,134

Target Price Rs 1,331

Nifty 10,905

Sensex 36,374

KEY STOCK DATA

Bloomberg RIL IN

No. of Shares (mn) 6,339

MCap (Rs bn) / ($ mn) 7,191/101,256

6m avg traded value (Rs mn) 10,731

STOCK PERFORMANCE (%)

52 Week high / low Rs 1,329/871

3M 6M 12M

Absolute (%) (1.5) 3.9 22.7

Relative (%) (6.0) 4.3 19.0

SHAREHOLDING PATTERN (%)

Promoters 47.27

FIs & Local MFs 12.01

FPIs 24.31

Public & Others 16.41

Source : BSE

Nilesh Ghuge [email protected] +91-22-6171-7342

Divya Singhal [email protected] +91-22-6639-3038

https://www.hdfcsec.com/hsl.docs/Reliance%20Jio%20-%203QFY19%20-%20HDFC%20sec-201901180900332542846.pdf

https://www.hdfcsec.com/hsl.docs/Reliance%20Jio%20-%203QFY19%20-%20HDFC%20sec-201901180900332542846.pdf

RELIANCE INDUSTRIES : RESULTS REVIEW 3QFY19

Page | 2

Quarterly Financials Snapshot (Standalone) (Rs bn) 3QFY19 3QFY18 YoY(%) 2QFY19 QoQ (%) 9MFY19 9MFY18 YoY %

Revenues 1,000.96 732.56 36.6 961.67 4.1 2,874.22 2,060.05 39.5

Material Expenses 747.93 497.17 50.4 707.98 5.6 2,114.85 1,413.93 49.6

Employee Expenses 14.56 11.42 27.5 14.93 (2.5) 44.29 34.94 26.8

Other Operating Expenses 93.40 86.53 7.9 89.84 4.0 269.55 228.02 18.2

EBIDTA 145.07 137.44 5.6 148.92 (2.6) 445.53 383.16 16.3

Depreciation 25.86 24.75 4.5 27.45 (5.8) 80.93 69.01 17.3

EBIT 119.21 112.69 5.8 121.47 (1.9) 364.60 314.15 16.1

Other Income 24.56 16.24 51.2 20.12 22.1 65.36 55.99 16.7

Interest Cost 24.05 10.94 119.8 24.17 (0.5) 69.60 31.96 117.8

PBT 119.72 117.99 1.5 117.42 2.0 360.36 338.18 6.6

Tax 30.44 33.45 (9.0) 28.83 5.6 94.29 89.03 5.9

RPAT 89.28 84.54 5.6 88.59 0.8 266.07 249.15 6.8

APAT 89.28 84.54 5.6 88.59 0.8 266.07 249.15 6.8

EPS 13.7 13.3 3.1 13.6 0.8 40.9 38.9 5.1

Source: Company, HDFC Sec Inst Research

Margin Analysis

3QFY19 3QFY18 YoY (bps) 2QFY19 QoQ (bps) 9MFY19 9MFY18 YoY (bps)

Material Expenses as % of Net Sales 74.7 67.9 685 73.6 110 73.6 68.6 494

Employee Expenses as % of Net Sales 1.5 1.6 (10) 1.6 (10) 1.5 1.7 (16)

Other Expenses as % of Net Sales 9.3 11.8 (248) 9.3 (1) 9.4 11.1 (169)

EBITDA Margin (%) 14.5 18.8 (427) 15.5 (99) 15.5 18.6 (310)

Net Profit Margin (%) 8.9 11.5 (262) 9.2 (29) 9.3 12.1 (284)

Tax Rate (%) 25.4 28.3 (292) 24.6 87 26.2 26.3 (16)


EBITDA growth was led by higher Petchem margins and volumes were offset by lower GRMs Interest cost and depreciation cost was higher owing to the capitalization of the new projects in petchem and refining.


Page | 3

Quarterly Segmental Snapshot (Standalone) (Rs bn) 3QFY19 3QFY18 YoY(%) 2QFY19 QoQ (%) 9MFY19 9MFY18 YoY(%)

Segmental Revenues

Petrochemicals 453.31 325.33 39.3 430.22 5.4 1,273.07 834.42 52.6

Refining 888.83 638.06 39.3 814.71 9.1 2,517.33 1,820.32 38.3

Oil & Gas 6.03 7.52 (19.8) 7.36 (18.1) 20.93 20.94 (0.0)

Others 3.51 3.15 11.4 4.95 (29.1) 11.53 9.55 20.7

Gross Revenues 1,351.68 974.06 38.8 1,257.24 7.5 3,822.86 2,685.23 42.4

Less: Inter segment 266.07 185.42 43.5 226.38 17.5 713.21 440.60 61.9

Less: Excise Duty/service tax recovered 84.65 56.08 50.9 69.19 22.3 235.43 184.58 27.5

Net Revenues 1,000.96 732.56 36.6 961.67 4.1 2,874.22 2,060.05 39.5

Segmental Results Before Interest, Tax & Exceptionals

Petrochemicals 79.93 56.59 41.2 79.74 0.2 237.12 145.56 62.9

Refining 49.45 60.76 (18.6) 51.57 (4.1) 153.23 189.83 (19.3)

Oil & Gas 1.19 (0.91) (230.8) (1.86) (164.0) (3.12) (4.18) (25.4)

Others 0.44 1.20 (63.3) 0.06 633.3 0.88 3.75 (76.5)

Total 131.01 117.64 11.4 129.51 1.2 388.11 334.96 15.9

EBIT Margins (%)

Petrochemicals 17.6 17.4 24 18.5 (90) 18.6 17.4 118

Refining 5.6 9.5 (396) 6.3 (77) 6.1 10.4 (434)

Oil & Gas 19.7 (12.1) 3,184 (25.3) 4,501 (14.9) (20.0) 505


Petrochemicals’ YoY growth in profitability was led by higher Px and PTA margins and increased throughput post the stabilisation of ROGC and Px plant Lower opex led to refining EBIT declining by just 4% QoQ despite a 7% fall in GRM


Page | 4

E&P business

KG-D6

KG-D6 gas volumes declined further to 1.86 mmscmd (-62% YoY, -46% QoQ). Oil volumes were at 0.010 mmbbl (-95% YoY, -92% QoQ). We expect KG D6 volume to ramp-up to 16 mmscmd, owing to R-series field development.

Update on R-cluster development: Drilling and lower completion for 2 wells out of 6 wells is completed.

PM

Gas volume was at 13.8 BCF (-11% YoY, 21% QoQ). Lower production was mainly on account of natural field decline and unplanned shutdown of wells owing to asset integrity issues.

CBM

The current production rate is ~0.9 mmscmd, with a gradual ramp-up in production taking place.

Shale Gas Average realisations were USD 4.2/mcfe (+1.3 YoY%,

+2.4% QoQ).

4QFY18 1QFY19 2QFY19 3QFY19

Production (BCFe) 28.7 23.8 21.2 20.9

Avg Realisation (USD/mcfe)

4.2 4.1 4.1 4.2

Gas price (USD/mmbtu)

3.0 2.8 2.9 3.6

Revenues (USD mn) 105 86 81 78

EBITDA (USD mn) 38 19 13 -1


Refining business

The throughput was at 18 mmt (+1.7% YoY and QoQ 109% utilisation). GRM was at USD 8.8/bbl (-24% YoY, -7.4% QoQ). Sequential decline was owing to lower Gasoline and Naphtha cracks.

The premium over Singapore GRM widened to USD 4.4/bbl.

Gasoline cracks decreased QoQ from USD 12.1/bbl to USD 4.7/bbl. Naphtha crack declined from USD -1.4/bbl to USD -6.4/bbl. Gasoil cracks remained stable QoQ at USD 15.8/bbl. ATF cracks were down from USD15.3/bbl to USD15/bbl.

During the quarter, all gasifiers in DTA successfully stabilised.

DHDS debottlenecked to higher capacity and designed performance was achieved.

Petchem and fibres

Polymer: The spreads for PP were below the 5-year average at USD 259/mt. HDPE-Naphtha spread improved marginally to USD 590/mt from USD 557/mt in 2Q. PVC margin declined to USD 410/mt from USD 494mt in 2Q. Polymer production was up 17% YoY and 5.8% QoQ to 1.489mmt.

Polyester: Polyester intermediate margins were strong particularly for Px and PTA, up +75/+46% YoY respectively.

Current production from CBM asset is ~0.9mmscmd Gas production from R-cluster expected in 2HFY21 is 12mmscmd, which will be ramped up to 32mmscmd by FY22 The Chinese Govt’s enforcement of a complete ban on the import of wastes (plastic, paper, slag and textiles) from other countries is driving demand for virgin polymer, thus supporting margins


Page | 5

Refineries’ Performance RIL’s GRM Trend vs. Singapore Complex GRM

Source: Company, HDFC Sec Inst Research Petchems’ Performance Petchem Sales Volumes


Crude Throughput (MnT)

v


Petchem EBIT and EBIT/kg


GRM is lower QoQ because of lower Gasoline and Naphtha cracks

EBIT/kg of sales volumes stood at Rs 20.7/kg compared to Rs 21.5/kg in 2Q and 17.2/kg in 3QFY18 down 3% QoQ and up 21% YoY

10

.8

11.5

10

.1

10

.8

11.5

11

.9

12

.0

11.6

11.0

10.5

9.5

8.8

7.7

5.0

5.1

6.7

6.4

6.4

8.3

7.2

7.0

6.0

6.1

4.3

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

RIL GRM Singapore GRM$/bbl

17.8

16.8

18.0

17.8

17.5

17.3

18.1

17.7

16.7

16.6

17.7

18.0

15.0

15.5

16.0

16.5

17.0

17.5

18.0

18.5

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

2,59

9

2,4

86

2,5

64

2,41

7

2,6

17

2,7

65

3,0

58

3,32

6

3,5

47

3,50

5

3,70

7

3,86

8

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

kTkT

27

29 35

34

35 40

49

57 6

3

77

80

80

-

5.0

10.0

15.0

20.0

25.0

15

25

35

45

55

65

75

85

95

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

EBIT Rsbn EBIT (Rs/kg)-RHSRs bn

Rs/kg


Page | 6

Polymers’ Performance Polyesters’ Performance Polymers’ Production

Source: Company, HDFC Sec Inst Research Polymer Margins (Indicative Industry Spreads)


Intermediates’ Production Volumes

Source: Company, HDFC Sec Inst Research Polyester Production Volumes


Polyester intermediate production was up 22% YoY and 4% QoQ to 2.84mmt with the start- of a new Px and MEG plant in Jamnagar Polyester production was up 12% YoY and down 6% QoQ to 697kt

-

200

400

600

800

1,000

1,200

1,400

1,600

4Q

FY1

6

1Q

FY1

7

2Q

FY1

7

3Q

FY1

7

4Q

FY1

7

1Q

FY1

8

2Q

FY1

8

3Q

FY1

8

4Q

FY1

8

1Q

FY1

9

2Q

FY1

9

3Q

FY1

9

PE PP PVCkt

-

500

1,000

1,500

2,000

2,500

3,000

4Q

FY1

6

1Q

FY1

7

2Q

FY1

7

3Q

FY1

7

4Q

FY1

7

1Q

FY1

8

2Q

FY1

8

3Q

FY1

8

4Q

FY1

8

1Q

FY1

9

2Q

FY1

9

3Q

FY1

9

PX PTA MEGkt

-

100

200

300

400

500

600

700

800

900

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

1Q

FY19

2Q

FY19

3Q

FY19

PP - Propylene HDPE - Naphtha

PVC - Naphtha - EDC

US$/t

-

100

200

300

400

500

600

700

800

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

POY PSF PETkt


Page | 7

US Shale Performance Production Volumes And Gas Realisation

Source: Company, HDFC Sec Inst Research Domestic E&P Performance

PMT: Production Volumes And Gas Realisation


Key Financials Trend


KG: Production Volumes And Gas Realisation


Average realisations were USD 4.2/mcfe (+1.3 YoY%, +2.4% QoQ)

PM gas volume was at 13.8 BCF (-7% YoY, -8.6% QoQ). Lower production was mainly on account of natural field decline and unplanned shutdown of wells owing to asset integrity issues

KG-D6 gas volumes declined further to 1.86 mmscmd.

-

10.0

20.0

30.0

40.0

50.0

60.0

-

1.0

2.0

3.0

4.0

4Q

FY1

6

1Q

FY1

7

2Q

FY1

7

3Q

FY1

7

4Q

FY1

7

1Q

FY1

8

2Q

FY1

8

3QFY

18

4Q

FY1

8

1Q

FY1

9

2Q

FY1

9

3Q

FY1

9

Production (RS) Gas price (US$/mmbtu)

US$/mmbtu BCFe

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

-2.0 4.0 6.0 8.0

10.0 12.0 14.0 16.0 18.0 20.0

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

PMT Gas Vol (BCM) PM Gas Price ($/mmbtu)

BCM $/mmbtu

-15%

0%

15%

30%

45%

60%

(20)

-

20

40

60

80

100

120

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

Revenues EBITDA EBITDA Margin (%)

US$ mn

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

-

10.0

20.0

30.0

40.0

4Q

FY1

6

1Q

FY1

7

2Q

FY1

7

3QFY

17

4Q

FY1

7

1Q

FY1

8

2Q

FY1

8

3Q

FY1

8

4Q

FY1

8

1Q

FY1

9

2Q

FY1

9

3Q

FY1

9

KG Gas Volume (BCM) KG Gas Price ($/mmbtu)

BCM $/mmbtu


Page | 8

Retail Performance Key Financials’ Trend


Store Additions And Performance Per Store


Revenue from grocery, consumer electronics and fashion & lifestyle increased by 7.7% sequentially to Rs 199bn

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

-

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

Revenues non-petro Revenues PetroEBITDA Margin (%)

Rs bn

-

10

20

30

40

50

60

70

80

90

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

No of stores Revenues non-petro/store (Rs mn)Rs mn


Page | 9

Assumptions FY16 FY17 FY18 FY19E FY20E FY21E

Crude price (US$/bbl) 47.0 48.0 57.5 78.0 75.0 75.0

INR-USD 65.8 66.9 66.0 70.1 72.0 72.0

Refining Business

GRM (US$/bbl) 10.8 11.0 11.6 9.8 11.5 12.0

Crude throughput (mmt) 69.6 70.1 69.8 70.1 70.1 70.1

Upstream Business

PMT

Gas (BCF) 72 63 62 62 62 62

Oil (mmbbl) 7 6 5 5 5 5

Panna Mukta Gas price (US$/mmbtu) 5.7 5.7 5.7 5.7 5.7 5.7

Tapti Gas price (US$/mmbtu) 5.6 5.6 5.6 5.6 8.4 8.4

KG

Gas (mmscmd) 10 8 5 3 16 21

Gas price (US$/mmbtu) 4.7 3.1 3.5 4.0 4.0 4.0

Petrochemicals

Sales volume (mmt) 10.2 10.1 12.7 13.2 13.2 13.2

EBIT/kg of sales volumes (Rs/kg) 10.1 13.0 16.5 19.2 21.6 20.7


Changes In Estimates

FY19E FY20E FY21E

Old New %Ch Old New %Ch Old New %Ch

Crude oil (USD/bbl) 78.0 78.0 - 75.0 75.0 - 75.0 75.0 -

Exchange rate (Rs/USD) 70.1 70.1 - 72.0 72.0 - 72.0 72.0 -

GRM (USD/bbl) 11.0 9.8 (10.9) 11.5 11.5 - 12.0 12.0 -

Petchem margin (Rs/kg)

18.7 19.2 2.9 21.3 21.6 1.4 20.4 20.7 1.5

Revenue (Rs bn) 3,968.8 3,931.5 (0.9) 3,963.7 3,963.7 (0.0) 3,993.1 3,993.1 (0.0)

EBITDA (Rs bn) 613.9 588.5 (4.1) 690.0 690.0 - 709.0 709.0 -

Interest (Rs bn) 56.6 72.9 28.8 46.9 74.5 58.8 37.2 67.3 80.9

Other Income (Rs bn) 95.5 90.1 (5.6) 105.3 98.8 (6.1) 117.1 109.3 (6.6)

APAT (Rs bn) 403.2 372.9 (7.5) 467.8 448.3 (4.2) 493.7 471.5 (4.5)

EPS (Rs/share) 63.7 58.9 (7.5) 73.8 70.8 (4.2) 77.9 74.4 (4.5)

Source: HDFC Sec Inst Research

The changes in estimates factors in a higher interest cost and lower other income


Page | 10

SOTP Valuation (Based On Dec-20E) Business EBIDTA (Rs bn) Multiple Value (Rs bn) Value per share Valuation basis

Petrochemicals 333 9.0 2,993 505 EV/EBITDA on Dec 20E

Refining 298 6.5 1,940 328 EV/EBITDA on Dec 20E

E & P

PMT 13 6.0 78 13 EV/EBITDA on Dec 20E

KG D6 54 9 NPV

NEC 25 4 NPV

CBM 24 4 NPV

Shale Gas 4.9 1.0 343 58 x Inv as on Mar-18

Investments in Retail 89.9 20.0 1,798 304 EV/EBITDA on Dec 20E

Investments in Telecom 3,179 537

Consolidated net Debt

(2,549) -430 x as on Dec-20E

Value per share 7,885 1,331

Source: Company, HDFC Sec Inst Research, * Valuation is based on 5.92bn shares (net of treasury shares)


Page | 11

Peer Set Comparison

MCap (Rs bn)

CMP (Rs)

RECO TP

(Rs) Upside

%

EPS (Rs/sh) P/E (x) P/BV (x) ROE (%)

FY18 FY19E FY20E FY21E FY18 FY19E FY20E FY21E FY18 FY19E FY20E FY21E FY18 FY19E FY20E FY21E

Reliance Industries 7,191 1,134 BUY 1,331 17 53.1 58.9 70.8 74.4 21.4 19.3 16.0 15.2 2.3 2.1 1.9 1.7 11.1 11.3 12.3 11.7

ONGC 1,861 145 BUY 183 26 15.5 18.3 20.7 21.0 9.3 7.9 7.0 6.9 1.0 0.9 0.9 0.8 10.5 11.8 12.6 12.0

Indian Oil Corp 1,308 138 BUY 155 13 22.1 16.4 18.1 20.8 6.2 8.4 7.6 6.6 1.0 1.0 0.9 0.8 19.9 13.5 13.8 14.5

BPCL 696 354 NEU 335 (5) 41.2 32.0 34.0 36.3 8.6 11.0 10.4 9.7 2.1 1.9 1.7 1.5 25.4 17.4 16.6 15.9

HPCL 372 244 NEU 261 7 41.7 24.9 27.8 32.2 5.9 9.8 8.8 7.6 1.6 1.4 1.3 1.1 28.7 15.1 15.2 15.9

Petronet LNG 336 222 BUY 329 48 13.9 13.6 17.0 20.1 16.0 16.3 13.1 11.1 3.5 3.3 2.9 2.6 23.3 20.4 23.4 24.7

GAIL 751 333 BUY 410 23 20.4 28.5 29.5 31.8 16.3 11.7 11.3 10.5 1.9 1.7 1.5 1.4 11.7 15.1 14.2 14.0

Oil India 196 173 BUY 221 28 23.5 23.8 28.1 28.8 7.4 7.3 6.2 6.0 0.8 0.7 0.7 0.6 9.4 9.2 9.9 9.2

Indraprastha Gas 193 276 BUY 386 40 9.6 10.5 12.7 14.7 28.8 26.4 21.8 18.7 5.4 4.7 4.1 3.6 20.9 19.6 20.7 21.1

Mahanagar Gas 89 900 BUY 1,081 20 48.4 55.3 55.3 57.4 18.6 16.3 16.3 15.7 4.2 3.7 3.3 2.9 24.3 24.3 21.3 19.6

Asian Oil Field Services* 3 83 NA 164 98 5.4 8.3 12.3 16.4 15.3 10.0 6.8 5.1 2.4 1.9 1.5 1.2 23.7 20.1 23.9 25.0

Source: Company, HDFC sec Inst Research, * Fair Price


Page | 12

Standalone Income Statement Rs bn FY17 FY18 FY19E FY20E FY21E

Revenues 2,420.25 2,900.42 3,931.46 3,963.65 3,993.06

Growth % 3.8 19.8 35.5 0.8 0.7

Raw Material 1,645.72 2,020.65 2,822.75 2,755.88 2,747.05

Employee Cost 44.34 47.40 57.83 70.55 86.07

Other Expenses 297.63 314.96 462.33 447.21 450.89

EBITDA 432.56 517.41 588.55 690.02 709.04

EBIDTA Margin (%) 17.9 17.8 15.0 17.4 17.8

EBITDA Growth % 9.9 19.6 13.7 17.2 2.8

Depreciation 84.65 95.80 111.74 116.69 122.40

EBIT 347.91 421.61 476.80 573.33 586.64

Other Income (Including EO Items)

87.09 82.20 90.09 98.84 109.34

Interest 27.23 46.56 72.93 74.47 67.26

PBT 407.77 457.25 493.96 597.70 628.72

Tax 93.52 121.13 121.02 149.42 157.18

RPAT 314.25 336.12 372.94 448.27 471.54

EO (Loss) / Profit (Net Of Tax) - - - - -

APAT 314.25 336.12 372.94 448.27 471.54

APAT Growth (%) 14.8 7.0 11.0 20.2 5.2

AEPS 49.6 53.1 58.9 70.8 74.4

AEPS Growth % 14.8 7.0 11.0 20.2 5.2


Standalone Balance Sheet FY17 FY18 FY19E FY20E FY21E

SOURCES OF FUNDS

Share Capital 32.51 63.35 63.35 63.35 63.35

Reserves And Surplus 2,850.62 3,083.12 3,399.83 3,780.52 4,180.96

Total Equity 2,883.13 3,146.47 3,463.18 3,843.87 4,244.31

Long-term Debt 787.23 815.96 965.96 865.96 765.96

Short-term Debt 665.00 634.89 705.06 650.76 596.55

Total Debt 1,452.23 1,450.85 1,671.02 1,516.72 1,362.51

Deferred Tax Liability 247.66 279.26 284.85 290.54 296.35

Long-term Provision 21.18 27.09 27.63 28.18 28.75

TOTAL SOURCES OF FUNDS 4,604.20 4,903.67 5,446.68 5,679.32 5,931.92

APPLICATION OF FUNDS

Net Block 1,531.30 2,009.64 2,011.50 2,055.17 2,093.17

Capital WIP 1,341.89 994.83 1,192.65 1,310.69 1,428.79

LT Loans And Advances 104.18 176.99 193.33 197.20 201.14

Total Non-current Investments 1,427.28 1,754.67 1,874.67 1,874.67 1,874.67

Inventories 340.18 395.68 506.24 510.39 514.17

Debtors 54.72 104.60 107.71 108.59 109.40

Cash and Cash Equivalent 536.60 560.08 574.62 585.50 606.77

Other Current Assets 131.31 178.76 235.97 294.18 367.33

Total Current Assets 1,062.81 1,239.12 1,424.55 1,498.66 1,597.68

Creditors 681.61 886.75 861.69 868.75 875.19

Other Current Liabilities & Provns 181.65 384.83 388.33 388.33 388.33

Total Current Liabilities 863.26 1,271.58 1,250.02 1,257.08 1,263.52

Net Current Assets 199.55 (32.46) 174.53 241.59 334.15

TOTAL APPLICATION OF FUNDS 4,604.20 4,903.67 5,446.68 5,679.32 5,931.92



Page | 13

Standalone Cash Flow Year ending March FY17 FY18 FY19E FY20E FY21E

Reported PBT 407.77 457.25 493.96 597.70 628.72

Non-operating & EO Items (69.53) (62.92) (90.09) (98.84) (109.34)

Interest Expenses (8.12) 10.70 72.93 74.47 67.26

Depreciation 84.65 95.80 111.74 116.69 122.40

Working Capital Change 195.33 205.32 (186.32) (49.93) (64.92)

Tax Paid (95.60) (86.15) (121.02) (149.42) (157.18)

OPERATING CASH FLOW ( a ) 514.50 620.00 281.20 490.66 486.94

Capex (302.66) (247.00) (311.43) (278.40) (278.50)

Free Cash Flow (FCF) 211.84 373.00 (30.22) 212.27 208.44

Investments (300.98) (327.39) (120.00) - -

Non-operating Income 87.09 82.20 90.09 98.84 109.34

Others

INVESTING CASH FLOW ( b ) (516.55) (492.19) (341.34) (179.56) (169.16)

Debt Issuance/(Repaid) 30.24 91.44 146.95 (102.99) (102.93)

Interest Expenses 8.12 (10.70) (72.93) (74.47) (67.26)

FCFE 250.20 453.74 43.80 34.81 38.26

Share Capital Issuance 6.92 1.25 - - -

Dividend - (39.16) (56.23) (67.59) (71.10)

FINANCING CASH FLOW ( c ) 45.28 42.83 17.79 (245.04) (241.28)

NET CASH FLOW (a+b+c) 43.23 170.64 (42.34) 66.06 76.50

EO Items, Others (17.56) (19.28) - - -

Closing Cash & Equivalents 536.60 560.08 574.62 585.50 606.77


Standalone Key Ratios FY17 FY18 FY19E FY20E FY21E

PROFITABILITY %

EBITDA Margin 17.9 17.8 15.0 17.4 17.8

EBIT Margin 14.4 14.5 12.1 14.5 14.7

APAT Margin 13.0 11.6 9.5 11.3 11.8

RoE 11.6 11.1 11.3 12.3 11.7

Core RoCE 26.6 29.5 27.9 29.1 26.8

RoCE 8.5 8.6 9.2 10.0 9.8

EFFICIENCY

Tax Rate % 22.9 26.5 24.5 25.0 25.0

Fixed Asset Turnover (x) 0.5 0.5 0.6 0.6 0.6

Inventory (days) 51 50 47 47 47

Debtor (days) 8 13 10 10 10

Other Current Assets (days) 20 22 22 27 34

Payables (days) 103 112 80 80 80

Other Current Liab & Provns (days) 27 48 36 36 35

Cash Conversion Cycle (days) (51) (75) (37) (32) (25)

Net Debt/EBITDA (x) 2.1 1.7 1.9 1.3 1.1

Net D/E 0.3 0.3 0.3 0.2 0.2

Interest Coverage 16.0 10.8 7.8 9.0 10.3

PER SHARE DATA (Rs)

EPS 49.6 53.1 58.9 70.8 74.4

CEPS 63.0 68.2 76.5 89.2 93.8

Dividend 6.2 6.8 7.6 9.1 9.6

Book Value 455.1 496.7 546.7 606.8 670.0

VALUATION

P/E (x) 22.9 21.4 19.3 16.0 15.2

P/Cash EPS (x) 18.0 16.6 14.8 12.7 12.1

P/BV (x) 2.5 2.3 2.1 1.9 1.7

EV/EBITDA (x) 18.7 15.6 14.1 11.8 11.2

EV/Revenue (x) 3.3 2.8 2.1 2.0 2.0

Dividend Yield (%) 0.5 0.6 0.7 0.8 0.8

OCF/EV (%) 6.4 7.7 3.4 6.0 6.1

FCFF/EV (%) 2.6 4.6 (0.4) 2.6 2.6

FCFE/M Cap (%) 3.5 6.3 0.6 0.5 0.5



Page | 14

RECOMMENDATION HISTORY

Rating Definitions

BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period

NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period

SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Date CMP Reco Target

11-Jan-18 940 BUY 1,003

22-Jan-18 929 BUY 1,080

12-Apr-18 929 BUY 1,102

3-May-18 973 BUY 1,178

9-Jul-18 978 BUY 1,200

29-Jul-18 1,129 BUY 1,270

9-Oct-18 1,108 BUY 1,331

18-Oct-18 1,149 BUY 1,303

9-Jan-19 1,104 BUY 1,303

18-Jan-19 1,134 BUY 1,331

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

Jan

-18

Feb

-18

Mar

-18

Ap

r-1

8

May

-18

Jun

-18

Jul-

18

Au

g-1

8

Sep

-18

Oct

-18

No

v-1

8

De

c-1

8

Jan

-19

Reliance Inds TP


Page | 15

Disclosure: We,Nilesh Ghuge, MMS & Divya Singhal, CA authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. HSL has no material adverse disciplinary history as on the date of publication of this report. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest. Any holding in stock –No HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475. Disclaimer: This report has been prepared by HDFC Securities Ltd and is meant for sole use by the recipient and not for circulation. The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. 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In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk. It should not be considered to be taken as an offer to sell or a solicitation to buy any security. HSL may from time to time solicit from, or perform broking, or other services for, any company mentioned in this mail and/or its attachments. HSL and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions. 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HSL or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from t date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction in the normal course of business. HSL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither HSL nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. HSL may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the subject company or third party in connection with the Research Report. HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Compliance Officer: Binkle R. Oza Email: [email protected] Phone: (022) 3045 3600 HDFC Securities Limited, SEBI Reg. No.: NSE-INB/F/E 231109431, BSE-INB/F 011109437, AMFI Reg. No. ARN: 13549, PFRDA Reg. No. POP: 04102015, IRDA Corporate Agent License No.: HDF 2806925/HDF C000222657, SEBI Research Analyst Reg. No.: INH000002475, CIN - U67120MH2000PLC152193 Mutual Funds Investments are subject to market risk. Please read the offer and scheme related documents carefully before investing.

mailto:[email protected]


Page | 16

HDFC securities Institutional Equities Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park, Senapati Bapat Marg, Lower Parel,Mumbai - 400 013 Board : +91-22-6171 7330www.hdfcsec.com

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