02 November 2020 Results Review 2QFY21 Reliance Industries Industries... · 2020. 11. 2. · Page |...
Transcript of 02 November 2020 Results Review 2QFY21 Reliance Industries Industries... · 2020. 11. 2. · Page |...
02 November 2020 Results Review 2QFY21
Reliance Industries
HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters
In-line performance!
Our ADD rating on RIL with a price target of INR 2,140 /sh is premised on (1)
induction of Facebook, Google, Intel and Qualcomm as partners in Jio
Platform, which should enable the company to accelerate the growth of digital
connectivity and create value in the digital ecosystem through technology
offerings, (2) recovery in refining and petchem businesses in FY22E, (3) the
emergence of a clear path to a stronger balance sheet, and (4) stake sale in the
retail business.
RIL reported standalone revenue/EBITDA of INR 563/76bn, -35/-44% YoY
(in line with our estimates). Standalone APAT stood at INR 65bn, -33% YoY
(HSIE est: INR 36bn). The deviation in APAT from the estimates was mainly
due to the tax expense reversal on account of reduction in the annual
effective tax rate for FY21.
Standalone refining segment: Crude throughput declined 8/8% YoY/QoQ
to 15.3mmt. GRM stood at USD 5.7/bbl, down from USD 6.3/bbl in 1Q. The
sequential decline in refining margin was due to lower cracks across
products. RIL's GRMs outperformed Singapore GRM by USD 5.7/bbl (as
against USD 7.2/bbl in 1Q).
Standalone petrochemical segment: Production during 2Q was 9.7mmt, -
2/+9% YoY/QoQ. Petchem EBITDA was INR 59bn, -33% YoY given pricing
pressure because of disruptions in the local and global markets. EBITDA/t
stood at INR 6,052 (vs. INR 8,839/4,860 YoY/QoQ).
RJio: Revenue grew by ~33/6% YoY/QoQ to INR 175bn. ARPU rose to INR
145 (+14/3% YoY/QoQ) while the gross/net subscriber addition was ~27/7mn.
We expect ARPU to increase to INR 148/160 in FY21/22E owing to tariff hike
in Dec-19.
Reliance Retail (RR): Recovery from the pandemic has been encouraging
across categories. Revenue nearly hit base quarter levels (Rs. 411bn). 85% of
stores are now operational (1Q: 50%), of which half are fully operational.
Footfalls clocked 75% of pre-covid levels (vs 43% in 1Q). Consumer
Electronics (CE) doubled, and Fashion & Lifestyle (F&L) tripled their top-
lines respectively from their 1QFY21 lows (Yet to recoup base quarter sales).
Grocery and connectivity continued their strong growth momentum.
EBITDAM expanded 160bp QoQ to 5.4% as the mix sharply improved in
favour of the high margin CE and F&L segment. (Note: EBITDAM still
remains 90bp short of 2QFY20 levels).
Financial Summary – Consolidated Year Ending
March (INR bn)
2Q
FY21
1Q
FY21
QoQ
(%)
2Q
FY20
YoY
(%) FY20 FY21E FY22E FY23E
Net Sales 1,112 883 26.0 1,485 (25.1) 5,967 4,718 6,068 6,965
EBITDA 189 169 12.3 222 (14.5) 882 708 964 1,076
PAT 105 129 (18.8) 113 (7.1) 427 369 555 640
Diluted EPS (INR) 14.8 14.2 4.4 19.0 (21.9) 67.4 57.3 82.0 94.7
P/E (x)
30.5 35.9 25.0 21.7
EV / EBITDA (x)
17.7 19.1 13.2 11.5
RoE (%)
10.2 7.7 10.2 10.3
Source: Company, HSIE Research
ADD
CMP (as on 30 Oct 2020) INR 2,054
Target Price INR 2,140
NIFTY 11,642
KEY
CHANGES OLD NEW
Rating ADD ADD
Price Target INR 2,051 INR 2,140
EPS % FY21E FY22E
+10.7 +1.6
KEY STOCK DATA
Bloomberg code RIL IN
No. of Shares (mn) 6,339
MCap (INR bn) / ($ mn) 13,024/174,,681
6m avg traded value (INR mn) 39,030
52 Week high / low INR 2,371/867
STOCK PERFORMANCE (%)
3M 6M 12M
Absolute (%) (2.6) 41.5 40.2
Relative (%) (7.6) 24.0 41.3
SHAREHOLDING PATTERN (%)
Sept-20 Jun-20
Promoters 50.49 50.37
FIs & Local MFs 13.39 13.61
FPIs 25.20 24.72
Public & Others 10.92 11.30
Pledged Shares 0.0 0.0
Source : BSE
Harshad Katkar
+91-22-6171-7319
Nilesh Ghuge
+91-22-6171-7342
Jay Gandhi
+91-22-6171-7320
Divya Singhal
+91-22-6171-7348
Rutvi Chokshi
+91-22-6171-7356
Page | 2
Reliance Industries: Results Review 2QFY21
Change in estimates: We have raised our FY21 EPS by 10.7% to INR 57.3/sh. This
is mainly on account of reduction in the annual effective tax rate for FY21, offset
by a reduction in GRMs by 7.1% to USD 6.5/bbl, and assuming higher operating
expenses in the future.
Valuation: We raise our target price by 4% to INR 2,140, driven by the increase in
valuation of Reliance Retail. We have increased EV/e multiple from 23x to 25x for
reliance retail. We use EV/EBITDA to value downstream at Sept-22E EV/e, Retail
on peer benchmarked EV/e and E&P, Jio on DCF. The stock is currently trading
at 13.2x Sept-22E EV/EBITDA and 25x Sept-22E EPS. Maintain ADD.
RIL: Funds raised to strengthen capital structure and earnings
INR bn Fund raise Received till
Sep-20
Received post
Sep-20
Balance
commitments
JPL 1,521 1,183 0 337
RRVL 377 75 302 0
Rights Issue 531 133 0 398
RBML 76 76 0 0
TOTAL 2,505 1,467 302 736
Source: Company, HSIE Research
Page | 3
Reliance Industries: Results Review 2QFY21
Quarterly Consolidated Financial Snapshot
(INR bn) 2QFY21 1QFY21 QoQ (%) 2QFY20 YoY (%)
Revenues 1,112 883 26.0 1,485 (25.1)
Material Expenses 715 475 50.5 1,002 (28.7)
Employee Expenses 34 32 8.2 31 9.0
Other Operating Expenses 174 207 (16.1) 230 (24.3)
EBIDTA 189 169 12.3 222 (14.5)
Depreciation 66 63 5.0 53 24.7
EBIT 123 106 16.6 168 (26.8)
Other Income (incl EO items) 42 94 (54.6) 36 17.6
Interest Cost 61 67 (9.7) 55 11.6
PBT 105 132 (20.5) 150 (30.1)
Tax (0) 3 NA 37 NA
RPAT 105 129 (18.8) 113 (7.1)
Profit/Loss of Associate Company 1 3 (67.4) 1 94.4
EO (Loss) / Profit (Net Of Tax) - 48 NA - NA
APAT 96 84 13.6 113 (15.1)
EPS 14.8 14.2 4.4 19.0 (21.9)
Source: Company, HSIE Research
Quarterly Consolidated Segmental Snapshot
(INR bn) 2QFY21 1QFY21 QoQ (%) 2QFY20 YoY (%)
Segmental Revenues
Petrochemicals 297 252 17.8 385 (23.0)
Refining 622 466 33.3 972 (36.1)
Oil and Gas 4 5 (29.8) 8 (55.1)
Organized Retail 392 316 23.9 412 (4.9)
Others 316 301 4.9 255 24.0
Gross Revenues 1,630 1,341 21.5 2,033 (19.8)
Less: Inter segment 346 332 4.3 394 (12.1)
Less: Excise Duty/service tax recovered 171 127 35.3 153 11.9
Net Revenues 1,112 883 26.0 1,485 (25.1)
Segmental Results Before Interest, Tax & Exceptionals
Petrochemicals 49 34 44.3 76 (35.6)
Refining 20 29 (30.8) 50 (59.7)
Oil and Gas (6) (5) NA (3) NA
Organized Retail 15 7 110.8 20 (25.2)
Others 66 62 6.5 37 76.9
Total 144 127 13.3 180 (20.2)
EBIT Margins (%) 2QFY21 1QFY21 QoQ (bps) 2QFY20 YoY (bps)
Petrochemicals 16.5 13.5 304 19.7 (323)
Refining 3.2 6.2 (298) 5.1 (188)
Oil and Gas (177.5) (101.0) NA (38.7) NA
Organized Retail 3.9 2.3 160 4.9 (106)
Others 20.8 20.5 30 14.6 622
Source: Company, HSIE Research
Page | 4
Reliance Industries: Results Review 2QFY21
Standalone refining performance
Refining EBITDA, GRM and Singapore complex GRM Crude throughput (MMT)
Source: Company, HSIE Research
Source: Company, HSIE Research
Standalone petrochemical performance
Petchem EBITDA and per kg EBITDA Petchem production volumes
Source: Company, HSIE Research
Source: Company, HSIE Research
73
69
64
61
59
58
50
51
56
67
66
36
27
12
.0
11
.6
11
.0
10
.5
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8.2
8.1
9.4
9.2
8.9
6.3
5.7
8.3
7.2
7.0
6.0
6.1
4.3
3.2
3.5
6.5
1.6
1.2
(0.9
) 0.1
(5.0)
-
5.0
10.0
15.0
-
20
40
60
80
2Q
FY
18
3Q
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18
4Q
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1Q
FY
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2Q
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4Q
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FY
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FY
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Refining EBITDA (INR bn) RIL GRM - RHS
Singapore GRM - RHS$/bbl
18
.1
17
.7
16
.7
16
.6
17
.7
18
.0
16
.0
17
.5
16
.7
17
.4
18
.3
16
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15
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15.5
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18.5
2Q
FY
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3Q
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1Q
FY
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2Q
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3Q
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4Q
FY
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1Q
FY
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2Q
FY
21
75
00
80
00
88
00
92
00
94
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97
00
94
00
87
00
99
00
99
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99
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89
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97
00
0
2000
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10000
12000
2Q
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kT
59
69
77
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71
60
43
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-
2.00
4.00
6.00
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2Q
FY
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3Q
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EBITDA INR bn EBITDA (INR/kg)-RHS
Page | 5
Reliance Industries: Results Review 2QFY21
Reliance Jio
Quarterly Financial Snapshot
INR bn 2QFY21 1QFY21 QoQ (%) 2QFY20 YoY (%)
Revenue 175 166 5.6 131 33.1
Interconnect Costs (net)* 15 14 8.4 14 5.5
Interconnect costs as a % of revenue 8.6 8.4
10.9
Net revenue 160 152 5.3 117 36.5
License fees 19 18 7.0 14 41.6
License fees as a % of revenue 11.1 11.0
10.5
Network Costs 54 52 3.8 41 31.6
Network costs as a % of revenue 31.0 31.6
31.4
Employee Costs 3 3 4.1 4 (10.5)
S&D 3 3 6.9 3 (15.8)
Other expenses 5 5 (10.1) 3 36.6
Operating Costs 85 82 3.8 66 29.1
EBITDA 75 70 7.1 51 46.0
EBITDA margin % 42.9 42.3
39.1
D&A 29 27 4.9 18 61.7
Interest & Finance charge 10 12 (12.5) 19 (45.4)
Other Income 2 3 (28.6) 0 NA
PBT 38 34 12.8 15 150.5
Tax 10 9 12.7 5 81.9
PAT 28 25 12.9 10 187.3
Source: Company, HSIE Research|*Unlike other telcos, Jio reports interconnect costs on a net basis (i.e.
incoming revenue less costs)
Quarterly Operational Snapshot
Quarterly Operational Snapshot 2QFY21 1QFY21 QoQ (%) 2QFY20 YoY(%)
Closing Subs (Mn) 406 398 1.8 355 14.2
Gross Adds (Mn) 27 15 80.1 32 (13.9)
Churn (Mn) 20 5 282.7 8 161.8
Net Adds (Mn) 7 10 (26.3) 24 (69.6)
Monthly Churn (%) 2 0 NA 1 95
ARPU (Rs) 145 140 3.2 128 13.7
Data Usage (Mn GB) 14,420 14,200 1.5 12,020 20.0
Data Usage/Sub (GB/Month) 12 12 (0.7) 12 2.4
Minutes of Usage (Bn Mins) 932 889 4.8 813 14.7
MOU/Sub (Mins) 773 755 2.5 789 (2.0)
Termination rate/min (Rs) 0.06 0.06 - 0.06 -
Net OG mins to other operators (Bn) 252 232 8.4 239 5.5
Total mins (Bn) 932 889 4.8 813 14.7
Net OG mins as % of Total Mins 27.0% 26.1%
29.3%
Source: Company, HSIE Research
Page | 6
Reliance Industries: Results Review 2QFY21
Reliance Retail
Quarterly Financial Snapshot
INR bn 2QFY21 1QFY21 QoQ % 2QFY20 YoY %
Net Revenue 366 282 29.7 370 (1.1)
YoY % (1.1) (17.6)
28.2
EBITDA 20 11 83.4 23 (14.5)
EBITDA margin % 5.4 3.8 6.3
Source: Company, HSIE Research
Change in estimates
FY21E FY22E
Old New % Ch Old New % Ch
Crude oil (USD/bbl) 36.3 36.3 - 41.3 41.3 -
Exchange rate (INR/USD) 73.5 73.5 - 75.3 75.3 -
Standalone business
GRM (USD/bbl) 7.0 6.5 (7.1) 9.4 9.4 -
Petchem margin (INR/kg) 9.5 9.2 (2.9) 13.7 14.1 2.9
EBITDA (INR bn) 355 320 (9.9) 535 541 1.2
EPS (INR/share) 30.3 29.2 (3.7) 50.6 51.3 1.4
Jio
Revenue (INR bn) 716 690 (3.7) 882 858 (2.7)
EBITDA (INR bn) 330 335 1.5 388 409 5.6
APAT (INR bn) 133 138 3.1 165 182 9.8
EPS (INR/share) 3.0 3.1 3.1 3.7 4.0 9.8
ARPU 148.3 147.9 (0.3) 160.5 160.1 (0.3)
Closing Subs (Mn) 433 423 (2.4) 473 463 (2.2)
Consolidated business
EBITDA (INR bn) 698 708 1.5 947 964 1.9
EPS (INR/share) 51.7 57.3 10.7 80.7 82.0 1.6
Source: Company, HSIE Research
SOTP valuation
Business EV (INR bn) Value per share Valuation basis
Petrochemicals 2,051 323 EV/EBITDA on Sep 22E
Refining 1,946 307 EV/EBITDA on Sep 22E
E & P 236 37 NPV
Retail 3,052 481 EV/EBITDA on Sep 22E
Telecom 4,551 717 NPV
Investments/CWIP 1,384 218
Consol. net Debt/creditors for
Capex/deferred spectrum
liabilities
366 58 As on Sep-22
Value per share 13,586 2,140
Source: Company, HSIE Research
Page | 7
Reliance Industries: Results Review 2QFY21
Financials Consolidated Income Statement INR bn FY18 FY19 FY20 FY21E FY22E FY23E
Revenues 3,917 5,692 5,967 4,718 6,068 6,965
Growth % 28.3 45.3 4.8 (20.9) 28.6 14.8
Raw Material 2,675 3,945 4,052 3,086 3,921 4,546
Employee Cost 95 125 141 142 172 186
Other Expenses 505 781 892 782 1,011 1,157
EBITDA 642 842 882 708 964 1,076
EBIDTA Margin (%) 16.4 14.8 14.8 15.0 15.9 15.4
EBITDA Growth % 38.9 31.2 4.8 (19.7) 36.1 11.6
Depreciation 167 209 222 219 234 247
EBIT 475 632 660 489 731 828
Other Income (Including EO Items) 99 84 95 194 230 244
Interest 81 165 220 225 221 211
PBT 494 551 535 458 740 861
Tax 133 154 137 84 181 216
RPAT before minority interest 360 397 398 373 559 645
Share of associates/Minority interest 1 (1) (4) (4) (4) (4)
RPAT after adjusting for Associates/Minority interest 361 396 394 369 555 640
EO (Loss) / Profit (Net of Tax) - - (34) - - -
APAT 361 396 427 369 555 640
APAT Growth (%) 20.6 9.7 8.0 (13.7) 50.3 15.5
AEPS 60.9 66.8 67.4 57.3 82.0 94.7
AEPS Growth % 20.6 9.7 0.9 (15.1) 43.2 15.5
Source: Company, HSIE Research
Consolidated Balance Sheet INR bn FY18 FY19 FY20 FY21E FY22E FY23E
SOURCES OF FUNDS
Share Capital 59 59 63 64 68 68
Reserves And Surplus 2,876 3,812 4,470 4,941 5,837 6,411
Total Equity 2,935 3,871 4,533 5,006 5,904 6,479
Minority Interest 35 83 80 83 88 92
Long-term Debt 1,442 2,075 1,976 1,956 1,766 1,678
Short-term Debt 746 800 1,387 1,027 827 803
Total Debt 2,188 2,875 3,363 2,983 2,593 2,481
Deferred Tax Liability 448 645 705 629 630 631
Long-term Provision 114 162 206 207 208 209
TOTAL SOURCES OF FUNDS 5,720 7,636 8,888 8,908 9,423 9,892
APPLICATION OF FUNDS
Net Block 3,981 3,864 5,224 4,823 4,939 5,054
Capital WIP 1,870 1,795 1,091 1,039 1,102 1,134
Goodwill on consolidation 58 120 103 103 103 103
LT Loans and Advances 27 55 217 217 164 148
Non-current investments 253 1,646 2,039 442 464 487
Non-current assets 87 223 374 388 402 417
Total Non-current Assets 6,275 7,702 9,048 7,011 7,173 7,343
Inventories 608 676 739 622 699 713
Debtors 176 301 197 183 220 248
Cash and Cash Equivalent 43 111 309 2,050 2,478 2,725
ST Loans and Advances 108 5 7 - - -
Other Current Assets 328 471 602 543 507 486
Current investments 576 710 729 729 729 729
Total Current Assets 1,838 2,274 2,583 4,127 4,633 4,901
Creditors 1,069 1,083 968 708 978 1,092
Other Current Liabilities & Provns 1,324 1,257 1,775 1,522 1,405 1,260
Total Current Liabilities 2,393 2,340 2,743 2,230 2,383 2,352
Net Current Assets (555) (66) (160) 1,897 2,250 2,549
TOTAL APPLICATION OF FUNDS 5,720 7,636 8,888 8,908 9,423 9,892
Source: Company, HSIE Research
Page | 8
Reliance Industries: Results Review 2QFY21
Consolidated Cash Flow YE March (INR bn) FY18 FY19 FY20 FY21E FY22E FY23E
Reported PBT 494 551 535 458 740 861
Non-operating & EO Items (99) (85) (65) (198) (235) (248)
Interest Expenses 81 165 220 225 221 211
Depreciation 167 209 222 219 234 247
Working Capital Change 127 (420) 292 (317) 75 (52)
Tax Paid (99) 44 (77) (161) (180) (215)
OPERATING CASH FLOW ( a ) 670 464 1,127 227 855 805
Capex (843) (79) (861) 234 (412) (395)
Free Cash Flow (FCF) (173) 385 265 461 443 410
Investments 4 (1,394) (392) 1,597 (22) (23)
Non-operating Income 99 84 95 194 230 244
Others (3) (165) (313) (14) 39 1
INVESTING CASH FLOW ( b ) (743) (1,553) (1,472) 2,011 (165) (173)
Debt Issuance/(Repaid) 222 687 488 (380) (390) (112)
Interest Expenses (81) (165) (220) (225) (221) (211)
FCFE (32) 908 533 (144) (167) 86
Share Capital Issuance 30 0 4 1 3 -
Dividend (39) (48) (46) (28) (52) (64)
Others (46) 683 318 135 398 3
FINANCING CASH FLOW ( c ) 85 1,157 544 (497) (262) (385)
NET CASH FLOW (a+b+c) 12 68 198 1,740 429 247
EO Items, Others - - - - - -
Closing Cash & Equivalents 43 111 309 2,050 2,478 2,725
Source: Company, HSIE Research
Key Ratios Ratios FY18 FY19 FY20 FY21E FY22E FY22E
PROFITABILITY %
EBITDA Margin 16.4 14.8 14.8 15.0 15.9 15.4
EBIT Margin 12.1 11.1 11.1 10.4 12.0 11.9
APAT Margin 9.2 7.0 7.2 7.8 9.1 9.2
RoE 12.9 11.6 10.2 7.7 10.2 10.3
RoIC 13.7 12.2 11.2 7.4 10.4 11.5
RoCE 7.7 7.7 7.2 6.2 7.9 8.3
EFFICIENCY
Tax Rate % 27.0 27.9 25.7 18.4 24.5 25.1
Fixed Asset Turnover (x) 0.8 1.0 0.9 0.6 0.8 0.9
Inventory (days) 57 43 45 48 42 37
Debtor (days) 16 19 12 14 13 13
Other Current Assets (days) 41 31 37 42 30 25
Payables (days) 146 100 87 84 91 88
Other Current Liab & Provns (days) 181 116 160 180 131 101
Cash Conversion Cycle (days) (213) (123) (153) (159) (136) (113)
Net Debt/EBITDA (x) 2.4 2.4 2.6 0.3 (0.6) (0.9)
Net D/E 0.5 0.531 0.513 0.041 (0.104) (0.150)
Interest Coverage 5.9 3.83 3.00 2.17 3.31 3.92
PER SHARE DATA (Rs)
EPS 60.9 66.8 67.4 57.3 82.0 94.7
CEPS 86.8 99.3 101.9 91.3 116.6 131.3
Dividend 6.6 6.4 7.1 3.8 6.6 8.1
Book Value 455.4 600.7 703.4 776.7 873.3 958.2
VALUATION
P/E (x) 33.7 30.7 30.5 35.9 25.0 21.7
P/Cash EPS (x) 23.7 20.7 20.2 22.5 17.6 15.6
P/BV (x) 4.5 3.4 2.9 2.6 2.4 2.1
EV/EBITDA (x) 23.1 18.3 17.7 19.1 13.2 11.5
EV/Revenue (x) 3.8 2.7 2.6 2.9 2.1 1.8
Dividend Yield (%) 0.3 0.3 0.3 0.2 0.3 0.4
OCF/EV (%) 4.5 3.0 7.2 1.7 6.7 6.5
FCFF/EV (%) (1.2) 2.5 1.7 3.4 3.5 3.3
FCFE/M Cap (%) (0.2) 6.9 4.0 (1.1) (1.3) 0.6
Source: Company, HSIE Research
Page | 9
Reliance Industries: Results Review 2QFY21
Rating Criteria
BUY: >+15% return potential
ADD: +5% to +15% return potential
REDUCE: -10% to +5% return potential
SELL: >10% Downside return potential
Date CMP Reco Target
11-Oct-19 1,362 NEU 1,350
21-Oct-19 1,416 NEU 1,526
10-Jan-20 1,548 NEU 1,527
19-Jan-20 1,580 NEU 1,562
2-Mar-20 1,329 ADD 1,566
14-Apr-20 1,191 BUY 1,400
29-Apr-20 1,428 BUY 1,535
3-May-20 1,467 ADD 1,560
19-Jul-20 1,911 ADD 1,560
31-Jul-20 2,067 ADD 1,992
15-Oct-20 2,297 ADD 2,051
2-Nov-20 2,054 ADD 2,140
From 2nd March 2020, we have moved to new rating system
RECOMMENDATION HISTORY
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
Oct
-19
No
v-1
9
Dec
-19
Jan
-20
Feb
-20
Mar
-20
Ap
r-20
May
-20
Jun
-20
Jul-
20
Au
g-2
0
Sep
-20
Oct
-20
Reliance Inds TP
Page | 10
Reliance Industries: Results Review 2QFY21
Disclosure:
We, Harshad Katkar, MBA, Nilesh Ghuge, MMS, Jay Gandhi, MBA, Divya Singhal, CA, & Rutvi Chokshi, CA authors and the names subscribed to this
report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. HSL has no
material adverse disciplinary history as on the date of publication of this report. We also certify that no part of our compensation was, is, or will be directly or
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Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative
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conflict of interest.
Any holding in stock –No
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