Reliance Industries (Q1 FY15)

India Infoline News Service | Mumbai |

RIL reported GRMs of US$8.7/bbl in Q1 FY15 as against US$8.4/bbl in Q1 FY14 and US$9.3/bbl in Q4 FY14. The GRMs were above our estimates of US$8.5/bbl.

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CMP Rs975, Target Rs1,200, Upside 23.1%

Revenues at Rs963bn, higher by 9.9% yoy driven by strong growth in both refining and petrochemical segments aided by weak rupee
OPM falls by 26bps yoy and 94bps qpq; yoy fall was led by decline in contribution of E&P business and lower petchem EBIT margins, sequential fall was due to fall in EBIT margins of both refining and petchem segment
GRMs were at US$8.7/bbl was better than our expectations of US$8.5/bbl, GRMs saw 3.6% yoy rise while being lower by 6.5% qoq
Shale gas revenues and EBIDTA continue to rise sequentially
PAT at Rs56.5bn was better than our and street estimates owing to 1) better than expected refining segment performance and 2) lower than anticipated interest cost and depreciation
While we cut estimates, we maintain BUY rating with 9m TP of Rs1,200

Result table

(Rs m)	Q1 FY15	Q1 FY14	% yoy	Q4 FY14	% qoq
Net sales	963,510	876,450	9.9	951,930	1.2
Material costs	(788,460)	(729,830)	8.0	(798,590)	(1.3)
Purchases	(17,160)	(3,920)	337.8	(130)	13,100.0
Personnel costs	(9,290)	(8,990)	3.3	(9,480)	(2.0)
Other overheads	(73,300)	(62,960)	16.4	(60,420)	21.3
Operating profit	75,300	70,750	6.4	83,310	(9.6)
*OPM (%)*	*7.8*	*8.1*	*(26) bps*	*8.8*	*(94) bps*
Depreciation	(20,240)	(21,380)	(5.3)	(22,750)	(11.0)
Interest	(3,240)	(8,100)	(60.0)	(7,990)	(59.4)
Other income	20,460	25,350	(19.3)	20,360	0.5
PBT	72,280	66,620	8.5	72,930	(0.9)
Tax	(15,790)	(13,100)	20.5	(16,620)	(5.0)
*Effective tax rate (%)*	*21.8*	*19.7*		*22.8*
PAT	56,490	53,520	5.5	56,310	0.3
*PAT margin (%)*	*5.9*	*6.1*	*(24) bps*	*5.9*	*(5) bps*
Ann. EPS (Rs)	69.9	66.3	5.4	69.7	0.3

Source: Company, India Infoline Research

Segmental performance

Revenues (Rs mn)	Q1 FY15	Q1 FY14	% yoy	Q4 FY14	% qoq
Petrochemical	237,150	219,500	8.0	243,430	(2.6)
Refining	909,980	814,580	11.7	876,240	3.9
Oil and gas	15,570	14,540	7.1	14,170	9.9
EBIT margins (%)	Q1 FY15	Q1 FY14	bps yoy	Q4 FY14	bps qoq
Petrochemical	7.9	8.6	(65)	8.6	(66)
Refining	4.1	3.6	52	4.5	(37)
Oil and gas	31.3	24.2	707	26.7	460
Revenue contribution (%)	Q1 FY15	Q1 FY14	bps yoy	Q4 FY14	bps qoq
Petrochemical	20.4	20.8	(45)	21.4	(103)
Refining	78.1	77.2	91	77.0	112
Oil and gas	1.3	1.4	(4)	1.2	9
EBIT contribution (%)	Q1 FY15	Q1 FY14	bps yoy	Q4 FY14	bps qoq
Petrochemical	30.4	35.8	(537)	31.6	(121)
Refining	60.9	55.9	494	59.7	122
Oil and gas	7.9	6.7	119	5.7	215