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RELIANCE INDUSTRIES - Q4FY16 BEATS ALL ESTIMATES

By Research Desk
about 9 years ago
Reliance Industries has posted its Q4 results, wherein it has reported Consolidated PAT of Rs. 7,398 crores vis-à-vis Rs. 7,290 crores QoQ, which is ahead of our estimate of Rs. 7,175 crores – thanks to strong performance of Petchem, excellent inventory management, lower finance costs and higher interest income. However, Oil & Gas segment is seen subdued due to US Shale Gas biz as also Organised Retail continued to be a laggard.
 
Petchem: Petchem reported EBIT growth of 3% QoQ to Rs. 2,713 crores, backed by strength in polymer deltas, robust polymer demand and higher volumes in the polyester chain. However, EBIT margin softened by 70 bps QoQ, to 12.9% from 13.6% in the immediate preceding quarter. 
 
Refining Segment: Refining segment, which has been shining as gold for past couple of quarters, saw GRM falling to $10.8/bbl from $11.5/bbl seen in Q3, as Singapore Benchmark was seen averaging at $7.7/bbl vis-à-vis $8/bbl in immediate preceding quarter. Lower Crude refining of 17.8 million MT in Q4 as against 18 million MT in Q3 of FY16 coupled with lower GRMs saw EBIT falling marginally to Rs. 6,394 crores in Q4 against Rs. 6,491 crores in Q3. However, strong gasoline and naphtha cracks coupled with smart inventory management led 200 bps QoQ EBIT margins expansion, which is seen coming in at 13.3% vis-à-vis 11.3% in Q3.
 
Oil & Gas: Coming on to the Oil & Gas division, which has been an overhang on profitability, continued to struggled with EBIT falling to Rs. 14 crores, from Rs. 90 crores on sequential basis, due to lower upstream production in domestic blocks coupled with sharply lower oil and gas prices in both the domestic and US shale.
 
Organised Retail: Coming on the Organised Retail, which saw some hope of revival in Q3, disappointed again with EBIT contraction of 11% QoQ to Rs. 131 crores, against Rs. 147 crore in Q3. Also, EBIT margin, which fell by 10 bps QoQ to 2.3% is seen drastically low. Considering a capital employed of Rs. 6,401 crores in this segment, annualised pre-interest and pre-tax return of 7.8% is seen extremely low.
 
All of the above led to Consolidated EBITDA of Rs. 12,008 crores, representing growth of near 6% on QoQ basis, as also EBITDA margin expanded by good 330 bps sequentially to 20%. 
 
With this, Company has closed the fiscal with Consolidated PAT of Rs. 27,630 crores vis-à-vis Rs. 23,566 crores  seen in FY15, while EPS is placed at Rs. 93.8 for FY16.
Coming on to balance sheet, D/E ratio has remained at 0.74:1 with Long Term Debt of Rs. 1,42,000 crores, while there is Cash & Cash Eqv of Rs. 51,125 crores on the books.
 
At today’s closing price of Rs. 1,038, RIL is now ruling at PE multiple of 11x, EV/EBITDA of 10.2x and Book Value is at Rs. 775
 

HIGHLIGHTS OF QUARTER’S PERFORMANCE (CONSOLIDATED)

ï‚· Revenue (turnover) decreased by 8.9 % to ` 64,569 crore ($ 9.7 billion)

ï‚· PBDIT increased by 16.9 % to ` 13,994 crore ($ 2.1 billion)

ï‚· EBIT margin at 12.1%, up by 322bps

ï‚· Profit Before Tax increased by 12.9 % to ` 9,610 crore ($ 1.5 billion)

ï‚· Cash Profit (excluding exceptional item) increased by 13.8 % to ` 10,826 crore ($ 1.6 billion)

ï‚· Net Profit increased by 15.9 % to ` 7,398 crore ($ 1.1 billion)

 

FY 2015-16: FINANCIAL PERFORMANCE REVIEW (CONSOLIDATED)

RIL achieved a consolidated turnover of Rs.296,091 crore ($ 44.7 billion) for the year ended 31st March 2016, a decrease of 23.8%, as compared to Rs.388,494 crore in the previous year. The decline in turnover reflects sharp fall in feedstock and product prices during the year, partiall offset by record crude throughput and higher petrochemicals volumes. Crude oil price averaged at $ 45.6/bbl in FY16, a fall of 45% on Y-o-Y basis. With decrease in oil and product prices, exports from India were lower by 35.8% at Rs.146,855 crore ($ 22.2 billion) as against Rs.228,651 crore in the previous year.

Strong operating performance from the refining and petrochemicals business led to higher operating profits. Operating profit before other income and depreciation increased by 18.4% on a Y-o-Y basis to Rs.44,257 crore ($ 6.7 billion) from ` 37,364 crore in the previous year. Profit after tax was higher by 17.2% at Rs.27,630 crore as against Rs.23,566 crore in the previous year.

4QFY16: FINANCIAL PERFORMANCE REVIEW AND ANALYSIS (CONSOLIDATED)

For the quarter ended 31st March 2016, RIL achieved a turnover of Rs.64,569 crore ($ 9.7 billion), a decrease of 8.9%, as compared to Rs.70,863 crore in the corresponding period of the previous year. Decline in revenue was led by the 41.4% Y-o-Y decline in benchmark oil price which averaged at $30.4/bbl in 4Q FY16 as compared to $ 51.9/bbl in the corresponding period of the previous year.

Operating profit before other income and depreciation increased by 21.7% on a Y-o-Y basis to Rs.12,008 crore ($ 1.8 billion) from Rs.9,868 crore in the previous year. Strong operating performance from refining and petrochemicals businesses coupled with favorable exchange rate movement was partially offset by lower contribution from Oil & Gas business.

Other income was lower at Rs.1,758 crore ($ 265 million) as against Rs.2,172 crore in corresponding period of the previous year due to change in investment mix. Depreciation (including depletion and amortization) was higher by 28.1% to Rs.3,571 crore ($ 539million) as compared to Rs.2,787 crore in corresponding period of the previous year primarily on account of capitalization of petrochemicals projects and higher depletion in shale gas business.

Interest cost was at Rs.813 crore ($ 123 million) as against Rs.677 crore in corresponding period of the previous year due to higher average exchange rates during the quarter.

Profit after tax including exceptional items was higher by 15.9% at Rs.7,398 crore ($ 1.1 billion) as against Rs.6,381 crore in the corresponding period of the previous year. Basic earnings per share (EPS) for the quarter ended 31st March 2016 was Rs.25.1 as against Rs.21.7 in the corresponding period of the previous year.

Outstanding debt as on 31 st March 2016 was Rs.181,079 crore ($ 27.3 billion) compared to Rs.160,860 crore as on 31st March 2015. Cash and cash equivalents as on 31st March 2016 were at Rs.86,033 crore ($ 13.0 billion). These were in bank deposits, mutual funds, CDs and Government Bonds and other marketable securities.

REFINING & MARKETING BUSINESS

FY16 revenue from the Refining and Marketing segment decreased by 30.9% Y-o-Y to Rs.234,946 crore ($ 35.5 billion), reflecting sharp fall in average crude oil prices during the year. Refining EBIT increased by 49.1% Y-o-Y to a record level of Rs.23,598 crore, supported by seven year high GRM and record crude throughput of 69.6 MMT (utilisation of 112%). GRMs were underpinned by strong light distillate cracks, lower energy costs and advantageous crude sourcing opportunities provided by over-supplied crude markets. RIL"Ÿs GRM for the year stood at $ 10.8/bbl as against $ 8.6/bbl in the previous year. RIL"Ÿs GRM outperformed Singapore complex margins by $ 3.3/bbl, highest level achieved in the last seven years.

PETROCHEMICALS BUSINESS

FY16 revenue from the Petrochemicals segment decreased by 14.9% Y-o-Y to Rs.82,410 crore ($ 12.4 billion), reflecting lower product prices resulting from sharp decline in crude and feedstock prices. This was partially offset by higher volumes mainly on account of start-up of new PTA and PET capacities during the year. Petrochemicals segment EBIT was at a record level of Rs.10,221 crore ($ 1.5 billion), supported by strong polymer deltas, favourable naphtha cracking economics and rebound in MEG and PX deltas.

OIL AND GAS (EXPLORATION & PRODUCTION) BUSINESS

FY16 revenue from the Oil & Gas segment decreased by 34.7% Y-o-Y to Rs.7,527 crore ($ 1.1billion), reflecting the low commodity price environment. The segment EBIT for the year declined sharply by 88.1% to Rs.378 crore ($ 57 million). The segment profitability was impacted by lower oil and gas price realisations and decrease in domestic upstream volume. US shale operations were impacted by low commodity prices despite marginally higher volumes.

ORGANIZED RETAIL

For FY16, Reliance Retail reported a turnover of Rs.21,612 crore against Rs.17,640 crore during the same period last year, registering a robust growth of 22.5%. Revenue CAGR over the last five years has sustained at 29%. The business delivered highest ever PBDIT of #8377; 891 crore in FY16 as against #8377; 784 crore in the previous year. EBIT for the year stood at #8377; 506 crore, up 21.3% Y-o-Y.