Reliance Industries Ltd. share price target

Markets await Q2 growth print

Loan growth plummets to 8%

Q2FY20 topline grew 4.2% YoY to Rs. 152,149cr, primarily driven by growth in the Retail segment (+27.0% YoY; contributed ~20.3% of revenue) and Digital Services segment (+42.7% YoY; ~7.7% of revenue). This was partially offset by the lackluster performance from Petrochemicals (-11.9% YoY; ~19.0% of revenue) and Refining segment (-1.6% YoY; ~47.9% of revenue) due to unplanned outages, continued effect of trade tensions and raw material price volatility. Standalone exports fell 12.1% YoY to Rs. 53,161cr. Overall EBITDA margin was up 170 bps YoY to 17.0%, helped by margin expansions in Retail (+180 bps YoY) and Digital Services operations (+315 bps...

October MPC Minutes: Growth concerns imply another 25bps cut. RIL: Cyclicals a mixed bag, RJio and Retail surge ahead. LTI: On course for a rebound. Ather Energy: Key call takeaways. Agriculture: Maharashtra's sugar production to nearly halve in 2019-20

RIL's core refining business gains from upcoming IMO regulations. However, both refining and petchem face demand slack with impending capacity additions over CY19/20E. We expect a near term topping out from these businesses. While the Grocery and F&L businesses will continue to grow in the near term, CDIT's growth (36.4% of total sales) should cool off as Jio sub adds moderate. Monetisation of Jio's infrastructure is a positive trigger, but timing/pricing are crucial. Maintain NEUTRAL. We maintain NEUTRAL on RIL post an inline performance in 2QFY20. Our SOTP valuation is Rs 1,526/sh (7.5/9.0x EV/e for refining/petchem, 18.0x EV/e for Retail, 10x EV/e for Telecom business and Rs 116/sh for E&P; assets).

Reliance Industries' (RIL) Q2FY20 EBITDA marginally beat estimates at Rs 221bn (+5% YoY, +4% QoQ).

Reliance Industries (RIL) achieved net sales of Rs 152149 crore, an increase of 4% as compared to Rs 146018 crore in the corresponding period of the previous year. Increase in revenue is primarily on account of robust growth in Retail & Digital Services businesses which grew by 27% and 43%, respectively. This was partially offset by decrease in Refining and Petrochemicals segment revenue with 17.7% fall in Brent crude price. Exports (including deemed exports) from RIL's India operations were lower by 12.1% at Rs 53,161 crore as against Rs 60,460 crore in the corresponding period of the previous year primarily due to lower price realization for refining and petrochemical products and emphasis in domestic placement....

RR's near term growth visibility remains high esp. in grocery and F&L as 1. it seems past its rummaging through formats phase and 2. the addressable market is massive. However, CDIT growth (biggest segment) should cool off as JIO phone sales moderate. We build in revenue/EBITDA/PAT CAGR of 21/26/30% over FY19-22E and assign an SOTP-based fair value of Rs. 2tn (EV), implying 18x Sept-21 EV/EBITDA (Rs. 300/sh) on RIL share count. Reliance Retail continues to outpace peers, albeit pace of growth has come off. Gross revenue grew 27% YoY; Core retail (Grocery/F&L;/CDIT) grew ~35% YoY in 2Q as all key segments performed well. While the network blitz-scaling continues, more impressive is that SSSG remains healthy across its core (5-14%). Leverage manageable, but inching up (1x in FY19 from Zero-debt in FY17). Historically, capital intensity has remained high (Internal accruals funded only 50% of capital needs over FY14-19; That said, post two years of near-exponential growth, the scale achieved might just be enough to cover capital needs through internal accruals going forward. Expect RR to be FCFE positive by FY21E.

19 October 2019 at INR49.2b (-5% YoY, +11% QoQ). The premium to SGRM reduced to USD2.9/bbl (v/s USD3.4 in 2QFY19 and USD4.6 in 1QFY20) as the company had a lower gasoline and FO yield, which primarily drove the improvement in SGRM. Also, the increase in prices of heavy crude had an adverse impact. in 2QFY19 and USD8.1/bbl in 1QFY20. Throughput was at 16.7mmt (our to 4.0mmt from 3.3mmt in 2QFY19 and 2.9mmt in 1QFY20. Petrochemical EBIT stood at INR75b (-6% YoY, flat QoQ), led by pressure on product spreads due to the global supply glut (largely from the US and China).

RIL is the largest private player in the refining and petrochemical in India.