Reliance Industries Ltd. share price target

Reliance Industries (RIL) Q1FY19 revenue and PAT was in line with our expectation while EBITDA was 10% above our estimates led by petrochemicals division. Higher tax rate and DDA expenses led to in-line PAT despite strong beat at EBITDA level. DTA gasifiers commenced operation at Jamnagar which is likely to take another 3-6 months for significant contribution to its bottom line. We are revising our crude oil assumption upwards to US$72/65/bbl and exchange rate assumption to Rs68/US$ for FY19/FY20, respectively. We are raising EBITDA by 9.7%/14.4% for FY19/20 but cutting PAT by 2%/0.1% to factor in higher DDA and tax rate. We raise our SOTPbased TP to Rs1,200 from earlier Rs1,150. Due to recent run-up in stock valuation, we are...

Our SOTP-based target for RIL is Rs 1,270/sh based on Jun-20 earnings (6.5x EV/e for standalone refining, 8x EV/e for petchem, Rs 29/sh for domestic E&P, 1x EV/invested capital for Shale, 20x EV/e for Retail and 10x EV/e for Telecom. Maintain BUY 1QFY19 saw RIL yet again proving its operational mettle despite weak global GRMs and macros, owing to better petchem margins and volumes. Petchem EBIT stood at Rs 22/kg up 23/53% QoQ/YoY. This massive expansion of margins was owing to better product mix and use of US ethane/refinery off-gases as a feedstock. Petchem production volumes were up 33.3% YoY to 9.2mmt, with the refinery off gas cracker (ROGC) ramping up.

28 July 2018 Refining EBIT stood at INR52b (-18% YoY, -7% QoQ), with GRM Premium over Singapore complex stood at USD4.4/bbl. grew 94% YoY (+22% QoQ) to INR77b, led by favorable margins and strong volume growth. EBIT margin of 20% was higher than 17% in 1QFY18/4QFY18, primarily due to firm polyester chain deltas, stable polymer deltas, feedstock cost optimization, and a superior product mix. Production volumes were higher on account of ramp-up of ROGC. RIL reported E&P; EBIT loss of INR2.5b v/s loss of INR2.3m in 1QFY18 and INR4.2b in 4QFY18. KG-D6 gas production declined to 4.1mmscmd (-35% YoY, -3.4% QoQ). Shale gas production was down to 23.8bcfe (-31% YoY/QoQ) due to natural decline and temporary shut-in of wells.

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.