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You are here : IndiaNotes >> Research & Analysis >> Companies >> Reliance Industries Ltd. >> Research

RIL: Result in line with expectations; disappointing refining margins

KRChoksey | 18 Oct, 2011  | Follow Author | Add to my Favourites 

Quarterly result analysis
Reliance Industries Ltd (RIL) reported net Profit of Rs5703 cr. Net profit increased by 15.8% y-o-y, largely driven by improved performance in the refining and petrochemicals business. All manufacturing facilities operated at record levels with refineries achieving operating rates of 110%. Net sales improved by 36.7% to Rs78,569 cr on y-o-y. Other income was higher at Rs1102 cr as against Rs672 cr on a y-o-y basis primarily due to higher average liquid investments. Outstanding debt at the end of Q2FY12 was Rs71,399 cr compared to Rs67,397 cr as on 31st March 2011. RIL had cash and cash equivalents of Rs61,490 cr. The company has received total payment from BP. The company has guided that it has put its all exploration programme on hold till a joint team of RIL-BP reevaluates the entire exploration programme and waiting till to get necessary sanction from Govt.

Oil & Gas Segment: Oil & Gas segment reported a revenue hit of 17% on y-o-y basis, mainly due to the decline in production from KG-D6 to the level of 46 mmscmd (avg for Q2FY12), whereas EBIT margins have improved on the back of higher crude price realization of $112/bbl against $77/bbl in last year same period. Panna -Mukta field restored its operations and block achieving its normalized production. CBM Soghpur (M.P.) block is expected to start production of 3 mmscmd of gas in next 2 years, waiting for sales price approval from Govt.

Refining & Marketing: Refining segment posted a growth of 37% on y-o-y basis, the refining and marketing segment achieved a record revenue due to higher prices which accounted for 38% growth in revenue, while increase in volume accounted for 3.5% growth in revenue.

Stock valuation and recommendation:
KR Choksey strongly believes 1)The company will maintain GRM of $10.2/bbl over H2FY12 2) Any positive guidance on revival of gas production schedule from KG-D6 block would be biggest trigger 3) proper deployment of cash and strong balance sheet. KR Choksey cut FY12 EPS by 2.3% mainly due to changes in assumption of KG-D6 gas output (46mmscmd FY12). They also reset their 12 month price objective of Rs1020/share. KR Choksey maintains their rating of BUY with price objective of Rs1020/share and stock is showing upside potential of 23%.

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