Reliance Industries Ltd. share price target

ARPU and store count rise, offset by fall in GRM's In FY20, the company's revenue reached Rs. 611,645cr (+4.9% YoY), mainly driven by Organized Retail, Digital Services, and Media business. Organized Retail rose 24.8% YoY in FY20 and 4.2% YoY in 4QFY20, helped by addition of 1,500 stores and strong footfalls. Digital Services business reported a 40.7% YoY growth in FY20, majorly driven by 26.3% YoY growth in subscribers' base and 34.3% YoY growth in total wireless data traffic. However, this growth was partially offset by Refining & Marketing (R&M;) revenue of Rs. 387,522cr (-1.6% YoY) due to weak crude oil prices due to...

Reliance Industries (RIL) Q4FY20 adjusted result was largely in-line with consensus estimates led by consumer businesses and positive surprise from refinery profit. RIL reported inventory loss of Rs42.5 bn as an exceptional item due to a sharp fall of US$44/bbl in crude oil price during the quarter. Though, higher GRM of US$8.9/bbl vs consensus estimate of US$7.5/bbl and robust 49% YoY growth in Digital Services EBITDA was a positive surprise. The company expects Rs1.05 tr of cash inflow during CY20 led by Right Issue proceedings (1:15 ratio at a price of Rs1,257), Facebook deal (to be completed by Q1FY21) and BP deal, which would help achieving its target of zero-netdebt by year end. We cut our EPS estimates by 13% and 5% respectively for FY21E/FY22E...

GRM for Q4FY20 at $8.9 per barrel was much higher than street estimates of around $7.2-8.0 a barrel, and was also remarkably outperforming Singapore complex margins by $7.7 a barrel....

4 May 2020 Net D:E Close on the heels of the RIL-Facebook deal (see Silver Lake has acquired 1.14% stake in Jio Platforms for INR55.8b, at post- money equity value of INR4.9t (in-line). The stake sale further reaffirms global demand/confidence of marquee tech investors in Jio Platforms. This would enable Jio Platforms to crystalize its digital plans by leveraging the global experience of its investors. Further, RJios leverage (net debt to EBITDA) has reduced from 9.7x in FY19 to 0.7x currently through recent capital reorganization, creation of InvIT and the stake sale, creating a lean balance sheet and healthy RoCE. We value Jio using DCF at INR 760/share which in-turn implies an FY22E EV/EBITDA of 11x. In an all-cash deal, Silver Lake has announced the acquisition of 1.14% stake in Jio Platforms at post-money equity value of INR4.9t and an enterprise value of INR5.2t. Compared to the recently announced Facebook deal at INR4.

2 May 2020 Standalone debt net of cash and current investments has risen from INR938b in FY19 to INR1,516b driven by transfer of INR1,080b of debt from telecom and partial repayments. While the stake sale is expected to fetch INR436b, the company is creating a separate O2C business and is looking forward to another transaction of a similar magnitude. business EBITDA came in line with our estimate of INR218b (+5% YoY), primarily led by better performance of the Digital and Retail segments. However, higher depreciation and interest cost led to a miss on PBT (before exceptional expense) to INR135b (13% miss, -2% YoY). The company recognized exceptional expense of INR42.7b, primarily as non-cash inventory loss in the O2C business (with ~INR0.2b toward other liabilities and AGR dues reversal). Reported PAT came in at INR66b (-37% YoY). Adj. PAT was 8% lower YoY to INR96b (20% miss).

Key highlights from Reliance Industries' (RIL) Q4FY20 results.

RIL, Jio Platforms Ltd (JPL) and Facebook Inc (FB) announced the signing of binding agreements for Rs435.7bn investment by FB in JPL. FB's investment will translate into a 9.99% equity stake in JPL on a fully diluted basis. Deal is subject to statutory approvals. The investment values JPL at a pre-money EV of Rs4.62tn, or USD65.95bn (at Rs70/USD) which is in line with RIL's aspiration of USD65-70bn. JPL is hold-co for Reliance Jio, along with other Jio app companies/digital platforms. RIL will now have ~90% stake in JPL. Concurrent with this, JPL, Reliance Retail and WhatsApp have also entered into a commercial partnership agreement to further accelerate Reliance Retail's New Commerce...

Reliance Industries (RIL) today announced that Facebook (FB) would invest Rs436 bn for a 9.99% stake in Jio Platforms, valuing it at Rs4.6 tr. We see partnership with a strong technological partner like FB would strengthen entire digital ecosystem for RIL and would enable it to come out with new business opportunities. First such opportunity we think is combined go-to-market of Whatsapp and Reliance Retail. FB's investment in Jio unlocks value for RIL and lowers its net debt (Rs1.5tr at the end of Q3FY20) and provides access to a global technology platform. The company's monetisation of assets after a massive investment of US$70 bn in downstream, retail and Telecom over the...

We have cut FY21/22E EPS by up to 33% and our TP by 11% to INR 1,400 factoring up to 31% lower downstream margins driven by slowing global economy. We use EV/EBITDA to value downstream at Sep-21E EV/e, Retail on peer benchmarked EV/e and E&P, Jio on DCF. RIL stock has corrected by 25% from its peak over the past 4 months driven by global economic slowdown concerns. Our view that the stock price correction is overdone, and the stock should outperform, is premised on 1) Non-cyclical domestic consumer business accounting for 56% of FY21E EBITDA (31% in FY19), 2) The stock factoring only an USD 3.0/bbl FY21E refining margin, 49% lower than Global Financial Crises (GFC) quarterly trough and 3) Interest Coverage ratio of 4.3x and Net Debt/EBITDA of 1.6x in FY22E (12-35% better than the FY19 lows). The stock offers 18% upside at our TP of INR 1,400.

Recovery is expected to be slow with potential EBITDA cut of ~60%/30% The ongoing lockdown should have limited impact on RJio as telecom companies are expected to see recharge upgrades given the increase in data consumption. We have cut GRM forecast from USD10/bbl earlier to USD8/bbl for FY21E. With valuation of INR450/share for Reliance Retail and INR500/share for RJio, the current price implies 2.5x FY22E EV/EBITDA for the core segment. If FY22E were to turn out similar to FY21E, the current price would imply 3.2x FY22E EV/EBITDA for the core segment. This could be due to additional ARPU increase or market share gains as RJio remains well placed to gain from the bleeding Given the fluid nature of the current circumstances, we have not cut our estimates for Reliance Retail, but have trimmed valuations to capture the potential revenue loss in the coming period and the risk of slow recovery.