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Friday, 21 October 2016

                        Reliance Industries Ltd - Consolidated (September Quarter FY17)                                                                             
Reliance Industries Ltd has posted consolidated Net Profit after taxes, minority interest and share of profit of associates and joint ventures of Rs. 72060 million for the quarter ended September 30, 2016 as compared to Rs. 93450 million for the same period previous year.  Decline of 23% in Net profit is on account of exceptional item of Rs. 43100 mn (gain on sale of EFS Midstream LLC and provision for impairment in Reliance Holding USA Inc) included in Q2 FY16. Excluding this exceptional item, Net profit has increased by 43% YOY. Total Income has increased from Rs. 759500 million for the quarter ended September 30, 2015 to Rs. 840440 million for the quarter ended September 30, 2016, rise of 11% YOY.

The company’s expenditure has increased by 8% YOY. Interest expense was curtailed by 10% YOY and stood at Rs. 8930 million compared to Rs. 9930 million same period previous year. Tax expenditure rose 35% YOY at Rs. 27080 million in Q2 FY17. Other income zoomed 64% YOY at Rs. 23930 million in the current September quarter. Gross Refining Margins, difference between value of petroleum products sold and cost of processing crude, for the September quarter stood at $ 10.1/bbl compared to $ 10.6/bbl for the corresponding quarter previous year.

Revenue from its core business, Refining and Marketing segment decreased by 0.4% YOY to Rs. 605270 million, whereas sequentially, there has been QOQ increase of 7%. RIL’s exports of refined products were at $ 4.8 billion during Q2 FY17 as compared to $ 5.5 billion in Q2 FY16. RIL’s GRM outperformed Singapore complex margins, standard for Asian refineries by $ 5.0/bbl. Revenue from Petrochemicals segment increased by 5.6% YOY to Rs. 224220 million due to increase in volumes of fiber intermediates and polyester products. EBIT for the segment was reported at Rs. 34170 million against Rs. 25220 million, growing 35% YOY due to strong volume growth and firm margin environment. EBIT margins expanded to 15.20%, 14 quarter high in the current quarter compared to 11.90% same period previous year as product deltas held up well despite lower prices. Oil & Gas revenues decreased 35.7% YOY to Rs. 13270 million. The fall was due to lower upstream production in domestic blocks coupled with lower oil and gas prices in both the domestic and US shale segments.

Revenues from organized retail grew 63% YOY to Rs. 80790 million from Rs. 49560 million in Q2 FY16. Revenues have increased on the back of growth in Digital, Fashion & lifestyle and petroleum products. During the quarter, Reliance Retail added 59 stores across various store concepts and strengthened its distribution network for consumer electronics. Reliance Jio Telecom venture is making investors anxious about its long term impact on the company’s profitability. Thus even after strong quarterly numbers, stock is down 1.80% intraday. We recommend BUY for the stock with a target price of Rs. 1160 for medium and long term investment. 

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