Reliance Industries Ltd. share price target

22 July 2019 USD8.5/bbl), as against USD10.5/bbl in 1QFY19 and USD8.2/bbl in 4QFY19. Premium over Singapore complex stood at USD4.6/bbl. Petrochem EBIT declined 5% YoY/QoQ to INR74b, primarily driven by lower volumes. However, implied EBITDA (USD/mt) was higher at USD424/mt v/s USD412/mt in 4QFY19 (USD437/mt in 1QFY19), despite a contraction in most petrochem margins, due to better optimization of feedstock. Gas production from KG D6 stood at 1.76mmscmd in the quarter, down from 1.82mmscmd in 4QFY19. RJio added 8.2m net subscribers, indicating a relative slowdown in the pace of addition over the past few INR126).

Reliance Industries' (RIL) Q1 FY20 EBITDA marginally beat estimates at Rs 213bn (+3% YoY, +2.3% QoQ)

RIL is creating value via (1) Transition from a low-multiple refining business to the consumer-oriented, digitally fired R-Jio, (2) Monetisation and deleveraging achieved by hiving off fiber and tower assets, (3) GRMs rising post the new IMO regulations (est. USD 9.2-12.0/bbl over FY19-21E). Our SoTP is Rs 1,535/sh (7.5x EV/e for refining, 9x EV/e for petchem, Rs 6.0/sh for domestic E&P, 1x EV/capital for Shale, 25x EV/e for Retail and 10x EV/e for Telecom). We upgrade RIL to BUY after the 4QFY19 beat. We believe RIL will be the biggest beneficiary of the IMO regulations, as it is the most complex refiner globally. Hiving off R-Jios optical fiber and tower assets will unlock value by reducing attributable consolidated debt.

Reliance Industries' Q4FY19 operating profit were slightly above expectations owing to strong petchem margins and higher than expected other income. Lower petchem volume and lower refinery profits led to a 2.3% QoQ fall in EBITDA. Petchem margin of 18.8% and GRM of US$8.2/bbl were above our estimates of 17.5% and US$8/bbl respectively. Organised Retail business and Digital Services business segmental profit...

Reliance JIO reported flat q-o-q net profit; robust 14.5% q-o-q growth in EBITDA for Retail business: Reliance JIO (RJIO Digital Services business) reported EBITDA margin of 39% (EBITDA of Rs. 4,329 crore) and PAT of Rs. 840 crore in Q4FY2019, up marginally by 1.1% q-o-q. Average revenue per user (ARPU) declined 2.9% q-o-q to Rs. 126/subscriber per month and net subscriber...

Operating profit before other income and depreciation increased 12.7% to Rs 20,832 crore from Rs 18,477 crore in the corresponding period of the previous year. The growth in operating profit was led by strong operating performance in Petrochemicals, Retail and Digital services...

We remain positive on Jio's wireless operations. Jio was already capitalizing a portion of its opex. The InvIT transaction raises additional concerns. Till now it was an interplay between PL (opex) and BS (capitalization of expenses). Now it will be off-balance sheet on InvITs. In our view, investors should look beyond the debt reduction and focus on incremental monetization options for the business tariff hikes and/or ancillary revenues. Jios 4QFY19 was marginally weak. To abate investors concerns of persistent capex, cash burn and rising debt, Jio/RIL finally re-engineered its BS with transfer of fiber and tower assets to SPVs majority owned by InvITs. This will lead to ~Rs 600bn de-leveraging for Jio. We value Jio at EV of Rs 2.9tn at 10x FY21E EV/EBITDA (Rs 490/sh of RIL).

RJio asset hive-off, retail save the day; cut to ADD on soft upside Reliance Industries' (RIL) Q4FY19 EBITDA was in line at Rs 208bn (+13% YoY, 2% QoQ). Key highlights were higher GRMs at US$ 8.2/bbl (US$ 7.7 est.) and retail business EBITDA at Rs 19.2bn (+77% YoY). RJio's subscriber traction remains robust, while the transfer of ~Rs 1.3tn in assets to the InvIT has pared debt. We raise FY20E/FY21E earnings by 5.4%/13.2% to bake in stronger RJio & retail profitability and roll over to a new Mar'20 TP of Rs 1,510 (vs....

our estimates. For Q4, GRMs were at US$8.2/bbl (PLe: US$8.4/bbl) due to weak gasoline spreads given high inventory and weak demand. However, gasoil spreads were healthy given low inventory. Q4 refining thruput were also lower at 16MTPA (18MTPA in Q4) due to maintenance shutdown. Management is constructive about refining margins as diesel spreads are likely to get a boost from implementation of IMO 2020, as ~3.5mbpd marine fuel Sulphur standards are likely to come down. RIL is well positioned to benefit given their high complexity. However, gasoline spreads are likely to be under pressure from high...

19 April 2019 USD8/bbl), as against USD11.0/bbl in 4QFY18 and USD8.8/bbl in 3QFY19; due to a planned shutdown in one of the CDUs. Premium over Singapore complex stood at USD5.0/bbl. Petrochem EBIT grew 23% YoY but declined 2% QoQ due to a shutdown in the PP and LDPE units. EBIT margin improved from 17.2% in 4QFY18 and 17.6% in 3QFY19 to 18.9% in the quarter due to a non-commensurate contraction in margins with respect to prices. On a blended basis, EBITDA/mt stood at USD422 (+10% YoY, +11% QoQ). Gas production from KG D6 stood at 1.82mmscmd in the quarter, down from 1.87mmscmd in 3QFY19.