Reliance Industries Ltd. share price target

In his AGM speech, Reliance Industries (RIL) chairman Mukesh Ambani laid out his long-term vision for integration of consumer-facing businesses (RJio & Retail) and conversion of all RIL's fuel products to petrochemicals within a decade (due to the threat to refining from electric vehicles). Future large investments will likely be weighted towards the petchem and digital divisions. We raise earnings estimates by 6%/10%/5.7% for FY19/FY20/FY21 as we...

High oil prices have started to affect the outlook on demand, albeit marginally. Crude oil prices are expected to cool off a bit (sans political events). Fundamentals for cyclicals are still looking up Singapore GRMs were stable at US$ 6.6/bbl in May'18 (0.7% MoM), while petrochem product cracks held strong. As price hikes resume, we expect OMC retail margins to normalise by end-Jun'18. We remain positive on cyclical businesses (Reliance Industries & Indian Oil) and gas utilities (GAIL & Petronet LNG)....

RIL is the largest private player in the refining, petrochemical and E&P; sectors in India. While RIL's refining complex in Jamnagar is the largest in the world...

RIL reported a strong show in Q4FY18 with 18% YoY growth in standalone revenue thanks to its improved performance from petrochemicals segment. Further, demand recovery post GST stabilization and improving economic activity also supported growth. EBITDA increased at a strong pace of 19% YoY supported by performance of petrochemical segment, however, EBITDA margin improved marginally by 19 bps YoY to 15.3% due to disappointing refining margins. Adj. PAT grew by just 6.7% YoY due to sharp increase (521% YoY) in interest expense. Going forward, we expect revenue/adj.PAT to grow at a CAGR...

Our SOTP-based target for RIL is Rs 1,178/sh based on Mar-20 earnings (6.5x EV/e for standalone refining, 8x EV/e for petchem, Rs 19/sh for domestic E&P, 1x EV/invested capital for Shale/Retail and 10x EV/e for Telecom (Rs 420/sh). Maintain BUY RILs standalone numbers continued to impress, led by higher Petchem volumes and margins. Petchem production volumes were up 10% QoQ and 42% YoY to 8.8 mT owing to ROGC ramp up. EBIT/kg of sales volumes stood at Rs 17.87/kg (Rs 17/kg in 3Q, 13.2/kg in 4QFY17). EBIT margin was up 356bps YoY to 17.2%. Q4 EBITDA came in at Rs 134.25bn (+19% YoY).

RIL came out with a healthy set of numbers in Q4FY18 which was in-line with our estimates. Robust performance from its Petrochemicals and Retail division was offset by disappointing result by refinery and Jio. Petchem reported highest ever volume of 8.8MMT (+10% QoQ) as ROGC fully optimized during the quarter. Petchem EBIT margin expanded 356bps YoY to 17.2%, resulted to highest ever EBIT of Rs63.4 bn. However, lower crude throughput (-5% YoY) and lower GRM of US$11/bbl vs US@11.5/bbl hurt refinery profits. Also, lower ARPU (11% fall QoQ) to Rs137 impacted Jio profits negatively....

We value RJio at 10x EV/EBITDA (vs. 9x for Bharti/Idea) at an EV of Rs 2,519bn (Rs 420/sh of RIL). Reliance Jio (RJio) reported yet another strong quarter with 26.5mn (21.5mn in 3Q) net subscriber additions. Rjio added 78mn subs in FY18 to close at 186.6mn, ~16% market share in 1.5 years of launch. Revenue growth was modest at 3.5% QoQ to Rs 71.3bn. This is on account of decline in ARPU from Rs 154 to Rs 137 QoQ owing to tariff cuts in Jan-18. We expect ARPU to further decline in 1QFY19. EBITDA increased by 2.5% QoQ to Rs 26.9bn owing to higher license fees.

Reliance Industries Ltd.'s fourth quarter net profit misses street estimates. RIL achieved revenue of Rs 129,120 crore for Q4FY18, an increase of 39% as compared to Rs 92,889 crore in the corresponding period of the previous year. Increase in revenue is primarily on account of volume increase with start-up of petrochemicals projects and oil price related increase in realizations for refining and petrochemical products. The increase in consolidated revenues reflects robust growth of 134% in Retail business and continuing growth momentum in wireless subscriber additions for Digital Services business. Exports (including deemed exports) from India were higher by 32.5% at Rs 51,295 crore as...

EBITDA of Rs134.3bn (+19% yoy, -2% qoq) was 4% below due to higher upstream loss. Jio reported PAT of Rs5.1bn on Rs137/187mn ARPU/subs. Net revenue/EBITDA rose by 4%/3% qoq as higher subs were offset by lower ARPU due to tariff cut, cash discount etc. GRM of US$11.0/bbl was in line while volume declined by 6% qoq to 16.7mmt due to turnaround. But, opex dropped 16% qoq, hence EBIT was in line with estimate. Upstream business performance was weak on lower output and one-offs. Consol. net debt rose by 5% qoq to Rs1.41trn while suppliers' credit was up 1% at Rs760bn....

Reliance Industries' (RIL) 4QFY18 standalone EBITDA increased 19% YoY (-2% QoQ) to INR134b, below our estimate of INR149b, due to lower throughput of 16.7mmt (our estimate: 17.8mmt). GRM of USD11.0/bbl was also below our estimate of USD11.4/bbl. PAT rose 7% YoY (+3% QoQ) to INR87b, benefiting from higher other income of INR26b (our estimate: INR17b) and lower depreciation of INR27b (our estimate: INR33b). Standalone PAT for the year stood at INR336b, +7% YoY. Consolidated PAT stood at INR361b, +20.9% YoY led by contribution from RJio.