Reliance Industries Ltd. - Nalanda Securitiesat Reliance Retail stores during this period. JIO...

30.2%

ANALYSTVaibhav Chowdhry

NALANDA SECURITIES PRIVATE LIMITED310-311 Hubtown Solaris, NS Phadke Marg, Opp Teli Gali, Andheri East, Mumbai 69+91-22-6281-9649 | [email protected] | www.nalandasecurities.com

ASSOCIATEAditya khetan

Q2

FY1

9 –

Re

sult

Up

dat

e

October 22, 2018

Reliance Industries Ltd.Downside

Scenario

Current

Price

Price

Target

1434

Upside

Scenario

STRONG BUY

1101

Refining margins witnessed pressure, however, Pet-chem outperforms

Refining & marketing witnessed margin pressureThe company’s R&M revenue grew by 41.6% y-o-y & 3.3% q-o-q to INR 987600million. EBIT declined by 19.6% y-o-y & increased marginally by 0.1% q-o-q to INR53220 million. The segment was impacted by significantly higher crude price (up47% Y-o-Y), tighter light-heavy differential and adverse movement in lightdistillate cracks on y-o-y basis and shutdown of Fluid Catalytic Cracking Unit(FCC). During Q2FY19, RIL Jamnagar refineries processed 17.7 MMT of crude. Theaverage refinery utilization rates globally in Q2FY19 were 89.9% in NorthAmerica, 85.2% in Europe and 88.4% in Asia. Refineries in the United Statescontinue to benefit from the availability of cheap domestic crude supporting highutilization. Utilization in Asia too was high with refiners coming out of the peakmaintenance season in Q1FY19 leading to higher utilization q-o-q.

Pet-chem business posted a strong show in Q2FY19, margins improved y-o-yThe petrochemicals business revenue grew by an impressive 56.2% y-o-y & 8.6%q-o-q to INR 437450 million. This strong growth in revenues was due to increasein volumes and price realizations. EBIT grew by 63.7% y-o-y & 3.3% q-o-q to INR81200 million supported by strong y-o-y volume growth led by successfulstabilization of the world’s largest ROGC downstream units and new PX facility.Sharp increase in segment performance also reflects improvement in theintegrated polyester chain margins partly offset by the softer polymer margins.EBIT margins stood at 18.6% in Q2FY19 as compared to 17.7% in Q2FY18 & 19.5%in Q1FY19.Soft Polymer margins were more than offset by strong Polyester margins aidedby healthy chain economics Q2FY19 q-o-q: PX (+45%), PTA (+11%), POY (+13%).Robust operations of ROGC complex and deep refinery integration underpin RIL’scost leadership y-o-y. Q2FY19 volume growth: PE (+86%), MEG (+92%).

Retail business reported multi-year profits, expanding in a big wayThe retail business revenue grew by 121.5% y-o-y & 25.3% q-o-q to INR 324360million. The strong growth is attributable to accelerated store expansion, strongvalue proposition and focus on customer experience across all consumptionbaskets. The company’s EBIT grew by 272.5% y-o-y & 16.4% q-o-q to INR 12440million. EBIT margins stood at 3.8% in Q2FY19 as compared to 2.3% in Q2FY18 &4.1% in Q1FY19.Reliance Retail recorded continued growth momentum and strong profitability inthe second quarter of the current financial year. Revenues have more thandoubled for the fourth consecutive quarter and PBDIT has more than tripled forthe third consecutive quarter demonstrating strength of the business. RelianceRetail received over 1 crore footfalls representing a growth of over 30% y-o-yduring the big sale period of 11th -15th August 18. Deep analytics of the shoppingbehaviors and continued customer connect helped in drawing customers to shopat Reliance Retail stores during this period.

JIO business ARPU disappoints, however, profits expectation are in lineThe digital business revenue grew 51.7% y-o-y & 13.4% q-o-q to INR 109420million. The company EBIT grew impressively by 682.4% y-o-y & 19.1% q-o-q toINR 20420 million. EBIT margins stood at 18.7% in Q2FY19 as compared to 3.6% inQ2FY18 & 17.8% in Q1FY19. Subscriber base as on 30th September 2018 stood at252.3 million. The company has lowest churn in the industry at 0.66% per month.ARPU stood at INR 131.7 per subscriber per month.We expect Jio to perform strongly going ahead and subsequent increase in tariffswill ramp up the revenue going ahead.

Market Data

Industry Oil & Gas

Sensex 34316

Nifty 10304

Bloomberg Code RIL:IN

Eq. Cap. (INR Millions) 59220

Face Value (INR) 10

52-w H/L 1329/862

Market Cap (INR Millions) 6858546

Valuation Data FY18 FY19E FY20E

EV/EBITDA (x) 11.7 8.5 7.0

P/E (x) 18.5 13.6 11.3

P/B (x) 2.2 2.0 1.7

Reliance Industries Ltd Vs SENSEX

Jun’18 Mar’18 Jun’17

Promoters 47.35 47.45 46.30

FIIs 24.40 24.34 22.43

DIIs 11.73 11.50 12.08

Retail 16.51 16.71 18.82

Total 100.0 100.0 100.0

Shareholding Pattern (in %)

*

* Read last page for disclaimer & rating rationale

Institutional Research

0

50

100

150

200

250

300

23-

Oct

-15

23-

Mar

-16

23-

Au

g-16

23-

Jan

-17

23-

Jun

-17

23-

No

v-17

23-

Ap

r-18

23-

Sep

-18

RIL Sensex

Reliance Industries Ltd | Q2FY19 - Result Update |

(INR Millions) FY16 FY17 FY18 FY19E FY20E

Revenue (Net of excise duty) 2,741,510 3,053,820 3,916,770 6,212,397 7,157,492

Growth - 11% 28% 59% 15%

EBITDA 417,560 462,060 641,760 887,347 1,021,220

Growth - 11% 39% 38% 15%

Net Profit 296,340 299,380 360,210 490,650 587,036

Growth - 1% 20% 36% 20%

EV/EBITDA 17.4 16.3 11.7 8.5 7.0

P/E 10.2 13.1 18.5 13.6 11.3

ValuationsWe value the company using SOTP valuation, thereby, valuing refining & petchem business at 7.5x FY20E EBITDA & telecom at7x FY20E EBIDTA to arrive at a target price of INR 1434/share indicating 30.2% upside.

Source: NSPL Research





Q2FY19 Result Analysis

(INR Millions) Q2FY19 Q2FY18 Q1FY19 Y-o-Y Q-o-Q

Revenue (Net of excise duty) 1433230 914810 1287560 56.7% 11.3%

COGS 1004790 613330 900010 63.8% 11.6%

Employee Expenses 29270 22600 29510 29.5% -0.8%

Other Expenses 188090 123230 151430 52.6% 24.2%

Total Expenses 1222150 759160 1080950 61.0% 13.1%

EBITDA 211080 155650 206610 35.6% 2.2%

Depreciation 52290 42870 51730 22.0% 1.1%

Other Income 12500 23170 17780 -46.1% -29.7%

EBIT 171290 135950 172660 26.0% -0.8%

Finance Cost 39320 22720 35500 73.1% 10.8%

PBT (before exceptional item) 131970 113230 137160 16.6% -3.8%

Share of associates 10 140 100 -92.9% -90.0%

Exceptional items 0 0 0

PBT (after exceptional item) 131980 113370 137260 16.4% -3.8%

Taxes 36490 32400 42410 12.6% -14.0%

Net Profit 95490 80970 94850 17.9% 0.7%

EPS in INR 16.06 13.67 15.97 17.5% 0.6%

• The company’s net sales grew 56.7% y-o-y and 11.3% q-o-q to INR 1433230 million in Q2FY19.• EBITDA grew by 35.6% y-o-y and 2.2% q-o-q to INR 211080 million in Q2FY19. EBITDA Margins stood at 14.5% in Q2FY19 as

against 16.4% in Q2FY18 and 15.5% in Q1FY19. Margins witnessed pressure owing to high raw material cost which stood at68.8% in Q2FY19 as compared to 64.5% in Q2FY18 & 67.6% in Q1FY19.

• Employee expense grew by 29.5% y-o-y to INR 29270 million owing to expansion of petrochemical unit and newly installedROGC refinery.

• Finance cost grew by 73.1% y-o-y & 10.8% q-o-q to INR 39320 million in Q2FY19.• PBT grew by 16.4% y-o-y & de-grew by 3.8% q-o-q to INR 131980 million in Q2FY19.• Reported PAT grew 12.6% y-o-y and de-growth of 14% q-o-q to INR 95490 million in Q2FY19. PAT margins stood at 6.7% in

Q2FY19 as compared to 8.9% in Q2FY18 and 7.4% in Q1FY19.• PAT margins witnessed decline to the tune of 70bps y-o-y owing to high finance cost.

Q2FY19 Q2FY18 Q1FY19

Top-line contribution share

Petrochemicals 23% 23% 23%

Refining & Marketing 51% 56% 54%

Oil & Gas 1% 1% 1%

Retail 17% 12% 15%

Digital services 6% 6% 5%

Others 3% 2% 2%

Total 100% 100% 100%

Bottom-line contribution share

Petrochemicals 49% 41% 49%

Refining & Marketing 32% 54% 33%

Oil & Gas -3% -2% -3%

Retail 8% 3% 7%

Digital services 12% 2% 11%

Others 2% 2% 2%

Total 100% 100% 100%





INR in Million Q2FY19 Q2FY18 Q1FY19 Y-o-Y Q-o-Q

Revenue 987600 697660 956460 41.6% 3.3%

EBIT 53220 66210 53150 -19.6% 0.1%

EBIT margins 5.4% 9.5% 5.6%

Crude Refined (MMT) 17.7 18.1 16.6 -2.2% 6.6%

GRM ($ per barrel) 9.5 12.0 10.5 -20.8% -9.5%

Refining & Marketing business

Source: Company, NSPL Research

• The company’s revenue grew by 41.6% y-o-y & 3.3% q-o-q to INR 987600million.• The company EBIT declined by -19.6% y-o-y & increased marginally by 0.1% q-o-q to INR 53220 million.• The segment was impacted by significantly higher crude price (up 47% Y-o-Y), tighter light-heavy differential and adverse

movement in light distillate cracks on y-o-y basis and shutdown of Fluid Catalytic Cracking Unit (FCC).• GRM for Q2FY19 stood at $ 9.5/bbl, outperforming Singapore complex margins by $ 3.4/bbl.• During Q2FY19, RIL Jamnagar refineries processed 17.7 MMT of crude. The average refinery utilization rates globally in

Q2FY19 were 89.9% in North America, 85.2% in Europe and 88.4% in Asia. Refineries in the United States continue to benefitfrom the availability of cheap domestic crude supporting high utilization. Utilization in Asia too was high with refinerscoming out of the peak maintenance season in Q1FY19 leading to higher utilization q-o-q.

• Global oil demand growth is tracking 1.3 mb/d in CY2018 with headwinds from high oil prices, currency depreciation inemerging markets and threat of trade protectionism. Asia continues to drive demand growth with China and India being keycontributors. US is the key contributor to the demand growth amongst OECD nations. Domestic oil demand grew by 2.7% inQ2FY19. Demand for gasoline grew by 6.6%, jet fuel by 9.7%, diesel by 2.8% and LPG by 4.8%.

• Higher fuel oil and LPG cracks more than offset the impact of lower cracks for gasoline and jet fuel. Shrinking spareproduction capacity and higher demand for crude oil continued to support prices despite higher production from SaudiArabia, Russia, US, Iraq, Kuwait and UAE. Dubai oil price averaged at $ 74.3/bbl, up $ 2.2/bbl q-o-q and $ 23.8/bbl Y-o-Y.

• Fuel oil cracks averaged $ (-) 4.2 /bbl in Q2FY19 as compared to $ (-) 6.0 /bbl in Q1FY19 and $ (-) 2.5 /bbl in Q2FY18. Seasonalsummer demand from Middle East limiting arbitrage flows to Asia and strengthened cracks during the quarter. Fuel oilinventory in Singapore fell below 5 year lows. Arab Light – Arab Heavy crude differential settled at $ 2.3 /bbl in Q2FY19 ascompared to $ 3.2 /bbl in Q1FY19 and $ 1.5 /bbl in Q2FY18. Stronger fuel oil crack and continued heavy crude productiondecline in Venezuela and Mexico supported higher OSPs for Arab Heavy resulting in a narrower light heavy differential.

Revenue & EBIT performance Production & margin performance

GRM stood at record lowest


987.6

697.66

956.46

53.22 66.21 53.15

0

200

400

600

800

1000

1200


INR

in T

ho

usa

nd

Mill

ion

Revenue EBIT

17.7

18.1 16.6

5.4

9.5

5.6

5

5.5

6

6.5

7

7.5

8

8.5

9

9.5

10

15.5

16

16.5

17

17.5

18

18.5


%

In M

MT

Crude Refined (MMT) EBIT margins

9.5

12

10.5

9

9.5

10

10.5

11

11.5

12

12.5


In $

Pe

r B

arre

l





• The petrochemicals business revenue grew by an impressive 56.2% y-o-y & 8.6% q-o-q to INR 437450 million. This stronggrowth in revenues was due to increase in volumes and price realizations

• The company’s EBIT grew by 63.7% y-o-y & 3.3% q-o-q to INR 81200 million supported by strong y-o-y volume growth led bysuccessful stabilization of the world’s largest ROGC its downstream units and new PX facility. Sharp increase in segmentperformance also reflects improvement in the integrated polyester chain margins partly offset by the softer polymermargins.

• EBIT margins stood at 18.6% in Q2FY19 as compared to 17.7% in Q2FY18 & 19.5% in Q1FY19.• Soft Polymer margins were more than offset by strong Polyester margins aided by healthy chain economics Q2FY19 q-o-q:

PX (+45%), PTA (+11%), POY (+13%). Robust operations of ROGC complex and deep refinery integration underpin RIL’s costleadership y-o-y Q2FY19 volume growth: PE (+86%), MEG (+92%).

• Ethylene prices remained stable during the quarter. However, propylene prices strengthened amid tight supply due to keycracker shutdowns in NE Asia. Polymer margins weakened on back of stronger feedstock prices (naphtha and ethane)coupled with weaker polymer prices due to increased supply from newly commissioned crackers in North America.

• On q-o-q basis, PP and HDPE prices softened by 2% and 5% respectively; whereas PVC prices remained stable. PP marginover propylene softened to $216/MT and PE margins over naphtha came down to $557/MT from $640/MT through thequarter. PVC margins softened by 8% q-o-q basis ($ 494/MT) due to high EDC prices led by low caustic environment. Due tohigh crude, naphtha and ethane prices, polymer margins are softer during this quarter. However, with enhanced feedstockflexibility and refinery off-gas cracker, RIL maintained overall cost leadership position and have among the best margins inthe industry.

• Polymer demand in India continues to witness sustained growth fostered by core sector performances, increasing purchasepower and boost in infrastructure spending. On y-o-y basis, domestic polymer demand increased by 7% during Q2FY19. PP,PE and PVC demand were higher by 6%, 8%, 6% y-o-y respectively. RIL’s polymer production was up by 19% y-o-y driven bystart-up of state-of-the-art ROGC complex and reliable operations from all the other assets. RIL continues to have leadershipposition in the domestic polymer market.


Revenue 437450 279990 402870 56.2% 8.6%

EBIT 81200 49600 78570 63.7% 3.3%

EBIT margins 18.6% 17.7% 19.5%

Production (MMT) 9.4 7.9 9.2 19.0% 2.2%

Petrochemicals business


Revenue & EBIT of Petrochemicals business Production & margin performance

• Firm energy prices continued to bolster the price uptrend across the polyester chain during the quarter. PX-Naphtha marginssurged 45% q-o-q ($487/MT) backed by firm upstream and downstream markets. Supply remained tight due toplanned/unplanned maintenance and delayed shipments from the new start-up capacities. RIL benefited from its recentexpansion of PX and MEG capacity at Jamnagar.

• PTA markets remained buoyant amidst increased polyester demand, tight supplies and strong futures markets.Consequently, PTA prices and margins firmed; prices were up 16% q-o-q and margins were up by 11% q-o-q, surpassing the5-year average. PTA-PX delta touched its highest levels since 2011.

• Polyester sales remained healthy at quarter beginning and gradually slowed towards the end. Polyester filament yarnproducers succeeded in passing down the rising cost to end-users; prices rose 11% q-o-q improving margins by 13%($320/MT). However, PSF markets were sluggish; producers were pressured by rising inventory, limited downstream buyingand tight cash flows. Despite 8% higher q-o-q prices, margins declined by 5% q-o-q ($144/MT) due to firm intermediateprices.

437.45

279.99

402.87

81.249.6

78.57

0

50

100

150

200

250

300

350

400

450

500


INR

in T

ho

usa

nd

Mill

ion

Revenue EBIT

9.4 7.9 9.2

18.60%

17.70%

19.50%

17%

18%

19%

20%

7

7.5

8

8.5

9

9.5

10


%

In M

MT

Production (MMT) EBIT margins





• The retail business revenue grew by 121.5% y-o-y & 25.3% q-o-q to INR 324360 million. The strong growth is attributable toaccelerated store expansion, strong value proposition and focus on customer experience across all consumption baskets.

• The company’s EBIT grew by 272.5% y-o-y & 16.4% q-o-q to INR 12440 million.• EBIT margins stood at 3.8% in Q2FY19 as compared to 2.3% in Q2FY18 & 4.1% in Q1FY19.• Reliance Retail recorded continued growth momentum and strong profitability in the second quarter of the current financial

year. Revenues have more than doubled for the fourth consecutive quarter and PBDIT has more than tripled for the thirdconsecutive quarter demonstrating strength of the business.

• Reliance Retail received over 1 crore footfalls representing a growth of over 30% y-o-y during the big sale period of 11th -15th Aug’18. Deep analytics of the shopping behaviors and continued customer connect helped in drawing customers toshop at Reliance Retail stores during this period.

• Reliance Retail’s grocery stores led by Reliance Fresh and SMART witnessed strong growth backed by new store expansionand volume growth in existing stores. 15 new SMART stores and 5 new Fresh stores were opened during the quarter. Thestores saw robust growth in Staples, Home & Personal Care and General Merchandise categories. All together Fresh andSmart now operate 523 stores across 100 cities.

• Reliance Trends crossed the milestone of 500 stores during the quarter and now operates 509 Trends and Trends extensionstores. Implementation of various omni-channel initiatives across network of Trends stores continues as per plan. Over 100stores were integrated for fulfilment for orders received through online channel. Trends has operationalized kiosks across465 stores to serve customers with sizes / options that are not readily available at stores. This would capitalize on theopportunity to bring offline customers to its online channel and also drive superior customer satisfaction. Reliance Retailcontinues to be the largest and fastest growing retailer in India with an unmatched reach across 5,800+ towns and cities.Reliance Retail added 138 stores and 535 Jio Points during 2Q FY 2018-19 translating into over 55 store openings in a week.Reliance Retail operated 9,146 stores with an area of over 19.50 million sq ft and 512 petro outlets as of 30th September,2018.


Revenue 324360 146460 258900 121.5% 25.3%

EBIT 12440 3340 10690 272.5% 16.4%

EBIT margins 3.8% 2.3% 4.1%

Area operated (Mn sq.ft) 19.5 14.2 18.6 37.3% 4.8%

Organised Retail business


Revenue & EBIT of Retail business EBIT margin show a growth trend YoY

Area operated under retail business

324.36

146.46

258.9

12.44 3.34 10.69

0

50

100

150

200

250

300

350


INR

in T

ho

usa

nd

Mill

ion

Revenue EBIT

3.80%

2.30%

4.10%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%


EBIT margins

19.5

14.2

18.6

0

5

10

15

20

25


In M

nSq

.Ft

Area operated (Mn sq.ft)





• The digital business revenue grew 51.7% y-o-y & 13.4% q-o-q to INR 109420 million.• The company EBIT grew impressively by 682.4% y-o-y & 19.1% q-o-q to INR 20420 million.• EBIT margins stood at 18.7% in Q2FY19 as compared to 3.6% in Q2FY18 & 17.8% in Q1FY19.• Subscriber base as on 30th September 2018 stood at 252.3 million.• The company has lowest churn in the industry at 0.66% per month.• ARPU stood at INR 131.7 per subscriber per month.• Total wireless data traffic during the quarter of 771 crore GB,• Total voice traffic during the quarter of 53,379 crore minutes.• Jio has accelerated its pace of subscriber additions further with net addition during the quarter of 37.0 million (as against 28.7

million in the previous quarter), highest in any quarter since the launch of commercial services. Gross adds at 41.7 million andchurn of 4.7 million implying the lowest industry churn rate at 0.66% per month.

• Video consumption drove most of the usage, increasing to 410 crore hours per month on the network; average videoconsumption of 17.5 hours per subscriber per month

• The engagement metrics of the Jio subscribers is the highest in the industry in India and among the highest globally as well.Average data consumption at 11.0 GB per user per month, average voice consumption at 761 minutes per user per monthand average video consumption at 17.5 hours per user per month make Jio the leader in the industry across all of theseservice offerings. Average data consumption has continued to increase despite higher base, primarily driven by superiornetwork performance and improving use cases on the Jio platform.

• Reliance Retail Ltd launched the ‘Monsoon Hungama’ offer for JioPhone with upfront security deposit of only INR 501 for anew Jio-Phone during the quarter. The offer works in conjunction with return of an old feature phone. Also, JioPhone 2,which offers a larger screen and full QWERTY keyboard for a price of INR 2,999 has been offered through limited-period flashsales. Most used social media applications like YouTube, Facebook and WhatsApp are now available for Jio Phone users.

• The company announced its Jio GigaFiber services for Homes and Enterprise at the 41st AGM (Post IPO) of RIL held on 5thJuly 2018. Customers have shown overwhelming interest to avail Jio Giga Fiber services and homes are being connected onpriority based on the requests received from the neighborhoods.


Revenue 109420 72130 96530 51.7% 13.4%

EBIT 20420 2610 17150 682.4 19.1%

EBIT margins 18.7% 3.6% 17.8%

Subscribers (Millions) 252.3 138.6 215.3 82% 17.2%

Digital business


Revenue & EBIT of Digital business Significant jump in subscriber base

• Jio has already started work on connecting 50 million homes across 1,100 cities. It will work together with Hathway andDEN and all the LCOs to offer a quick and affordable upgrade to a world-class lineup of Jio Giga Fiber and Jio Smart-HomeSolutions to the 24 million existing cable connected homes of these companies across 750 cities. This will accelerate Jio’scommitment to connect 50 million homes with Jio Giga Fiber in the shortest possible time.

• We expect subscriber base to go up significantly and might able to cross 300+ million users by FY21E.• Strong financial performance despite competitive pressures led by growth in subscriber additions and industry leading

customer engagement.• Robust EBITDA margins and strong operating leverage to play out in the near future of digital business.

109.42

72.13

96.53

20.42

2.61

17.15

0

20

40

60

80

100

120


INR

in T

ho

usa

nd

Mill

ion

Revenue EBIT

252.3

138.6

215.3

0

50

100

150

200

250

300


In M

illio

ns

Subscribers





Profit & Loss (INR Millions) FY16 FY17 FY18 FY19E FY20E

Net sales 2,741,510 3,053,820 3,916,770 6,212,397 7,157,492

COGS 1886750 2122990 2674660 1886750 1886750

Employee Expenses 74,260 83,880 95,230 119,822 124,688

Other Expenses 362,940 384,890 505,120 613,723 641,763

EBITDA 417,560 462,060 641,760 887,347 1,021,220

D&A 116,110 116,460 167,060 222,248 235,161

Other income 74,800 94,430 99,490 125,858 121,453

EBIT 376,250 440,030 574,190 790,957 907,512

Interest Expense 36,950 38,590 80,520 113,043 84,875

PBT 339,300 401,440 493,670 687,567 822,637

Tax 88,700 102,060 100,980 196,917 235,601

PAT 296,340 299,380 360,210 490,650 587,036

EPS in INR 6.2 11.5 14.1 17.8 20.4

Balance Sheet (INR Millions) FY16 FY17 FY18 FY19E FY20E

Share Capital 29,480 29,590 59,220 59,220 59,220

Reserves & Surplus 2,286,080 2,607,500 2,875,840 3,314,817 3,840,030

Minority Interest 33,560 29,170 35,390 35,390 35,390

Shareholder's Funds 2,349,120 2,666,260 2,970,450 3,409,427 3,934,640

Long term borrowings 1,416,470 1,521,480 1,441,750 1,541,750 1,421,750

Long term provisions 12,310 23,530 29,060 40,872 42,044

Deferred tax liabilities 338,040 468,720 498,280 498,280 498,280

Other non-current liabilities 22,490 90,250 85,420 85,420 85,420

Total Non-current liabilities 1,789,310 2,103,980 2,054,510 2,166,322 2,047,494

Short Term borrowings 235,450 315,280 374,290 524,290 274,290

Trade payables 602,960 765,950 1,068,610 1,102,103 1,144,125

Other financial liabilities 895,330 1,045,410 1,251,510 1,815,913 1,867,985

Other current liabilities 100,050 208,820 431,790 362,728 373,129

Short-term provisions 17,750 17,690 12,320 30,728 31,609

Current liabilities 1,851,540 2,353,150 3,138,520 3,715,670 3,647,083

Total Equity and Liabilities 5,989,970 7,123,390 8,163,480 9,289,198 9,628,402

Fixed Assets 1,578,250 1,704,830 3,160,310 3,618,989 3,829,247

Capital work in progress 1,703,970 2,503,770 1,662,200 1,662,200 1,662,200

Intangible assets 228,310 231,510 820,410 939,482 994,065

Intangible assets under develop 583,000 744,600 208,020 208,020 208,020

Goodwill on consol 42,540 48,920 58,130 58,130 58,130

Loans & advances 20,320 27,080 26,680 47,039 48,388

Non current investments 415,120 256,390 252,590 262,694 273,201

Other Non-current assets 140610 138,160 137,280 239,989 246,870

Total Non-current Assets 4,712,120 5,655,260 6,325,620 7,020,941 7,314,397

Inventories 464,860 489,510 608,370 704,342 731,198

Current Investments 425,030 572,600 576,030 576,030 576,030

Trade receivables 44,650 81,770 175,550 142,037 146,110

Cash and cash equivalents 110,280 30,230 42,550 263,995 234,591

Short term loans & advances 8,410 9,960 23,270 31,515 32,419

Other current assets 163,450 198,710 327,610 443,691 456,414

Other financial assets 61170 85350 84,480 148,256 152,507

Total Current Assets 1,277,850 1,468,130 1,837,860 2,268,257 2,314,005

Total Assets 5,989,970 7,123,390 8,163,480 9,289,198 9,628,402






RATIOS FY16 FY17 FY18 FY19E FY20E

Profitability

Return on Assets (%) 5.0% 4.2% 4.4% 5.0% 5.0%

Return on Capital (%) 9.4% 9.8% 12.0% 14.4% 16.1%

Return on Equity (%) 12.6% 11.2% 12.1% 14.4% 14.9%

Margin Trend

Gross Margin (%) 14.2% 14.0% 14.9% 16.5% 17.8%

EBITDA Margin (%) 12.8% 13.3% 13.3% 14.7% 15.8%

Net Margin (%) 10.8% 9.8% 9.2% 9.8% 11.0%

Liquidity

Current Ratio 0.7 0.6 0.6 0.6 0.6

Quick Ratio 0.3 0.3 0.3 0.3 0.3

Debtor Days 6 10 16 10 10

Inventory Days 107 102 107 102 102

Creditor Days 139 160 188 160 160

Solvency

Total Debt / Equity 0.7 0.7 0.6 0.6 0.4

Interest Coverage 10.2 11.4 7.1 7.7 10.7

Valuation Ratios

EV/EBITDA 17.4 16.3 11.7 8.5 7.0

P/E 10.2 13.1 18.5 13.6 11.3

P/B 0.6 0.7 2.2 2.0 1.7

Cash Flow (INR Millions) FY16 FY17 FY18 FY19E FY20E

PBT 387,370 400,340 494,260 687,567 822,637

Operating profit before working capital changes 388,870 441,700 627,650 1,013,206 1,142,673

Operating profit after working capital changes 467,160 596,330 813,030 1,157,863 1,238,359

Less income tax paid -85820 -100,830 -98,440 -196,917 -235,601

Cash Flow from Operating 381,340 495,500 714,590 960,946 1,002,758

(Incr)/ Decr in Gross PP&E -468,980 -781090 (739,530) (800,000) (500,000)

Purchase of investments -7,153,340 (6,547,600) (5,339,840) (10,104) (10,508)

Cash Flow from Investing -361,900 -662,920 -682,900 -834,438 -515,464

(Decr)/Incr in Debt 346730 317280 369,700 250,000 (370,000)

Dividend Paid -72590 -530 -39,160 -53,707 -64,257

Finance costs -92240 -129200 -176,690 -113,043 -84,875

Cash Flow from Financing -32,100 86,170 -20,010 94,937 -516,698

Incr/(Decr) in Balance Sheet Cash -12,660 -81,250 11,680 221,445 -29,404

Cash at the Start of the Year 122,850 110,230 29,890 42,550 263,995

Cash at the End of the Year 110,230 30,230 42,550 263,995 234,591





Disclaimer:This report has been prepared by Nalanda Securities Pvt. Ltd(“NSPL”) and published in accordance with the provisions of Regulation 18 of the Securities and Exchange Board ofIndia (Research Analysts) Regulations, 2014, for use by the recipient as information only and is not for circulation or public distribution. NSPL includes subsidiaries, group andassociate companies, promoters, directors, employees and affiliates. This report is not to be altered, transmitted, reproduced, copied, redistributed, uploaded, published or madeavailable to others, in any form, in whole or in part, for any purpose without prior written permission from NSPL. The projections and the forecasts described in this report arebased upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. Projections and forecasts are necessarily speculativein nature, and it can be expected that one or more of the estimates on which the projections are forecasts were based will not materialize or will vary significantly from actualresults and such variations will likely increase over the period of time. All the projections and forecasts described in this report have been prepared solely by authors of this reportindependently. None of the forecasts were prepared with a view towards compliance with published guidelines or generally accepted accounting principles.This report should not be construed as an offer to sell or the solicitation of an offer to buy, purchase or subscribe to any securities, and neither this report nor anything containedtherein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. It does not constitute a personal recommendation or take intoaccount the particular investment objective, financial situation or needs of individual clients. The research analysts of NSPL have adhered to the code of conduct under Regulation24 (2) of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. The recipients of this report must make their own investment decisions, based on theirown investment objectives, financial situation or needs and other factors. The recipients should consider and independently evaluate whether it is suitable for its/ his/ her/theirparticular circumstances and if necessary, seek professional / financial advice as there is substantial risk of loss. NSPL does not take any responsibility thereof. Any such recipientshall be responsible for conducting his/her/its/their own investigation and analysis of the information contained or referred to in this report and of evaluating the merits and risksinvolved in securities forming the subject matter of this report. The price and value of the investment referred to in this report and income from them may go up as well as down,and investors may realize profit/loss on their investments. Past performance is not a guide for future performance. Actual results may differ materially from those set forth in theprojection.Except for the historical information contained herein, statements in this report, which contain words such as ‘will’, ‘would’, etc., and similar expressions or variations of suchwords may constitute ‘forward‐looking statements’. These forward‐looking statements involve a number of risks, uncertainties and other factors that could cause actual results todiffer materially from those suggested by the forward‐looking statements. Forward‐looking statements are not predictions and may be subject to change without notice. NSPLundertakes no obligation to update forward‐looking statements to reflect events or circumstances after the date thereof. NSPL accepts no liabilities for any loss or damage of anykind arising out of use of this report.This report has been prepared by NSPL based upon the information available in the public domain and other public sources believed to be reliable. Though utmost care has beentaken to ensure its accuracy and completeness, no representation or warranty, express or implied is made by NSPL that such information is accurate or complete and/or isindependently verified. The contents of this report represent the assumptions and projections of NSPL and NSPL does not guarantee the accuracy or reliability of any projection,assurances or advice made herein. Nothing in this report constitutes investment, legal, accounting and/or tax advice or a representation that any investment or strategy is suitableor appropriate to recipients’ specific circumstances. This report is based / focused on fundamentals of the Company and forward‐looking statements as such, may not match witha report on a company’s technical analysis report. This report may not be followed by any specific event update/ follow‐up.

Following table contains the disclosure of interest in order to adhere to utmost transparency in the matter;

Disclosure of Interest Statement

Details of Nalanda Securities Pvt. Limited (NSPL)

• NSPL is a Stock Broker registered with BSE, NSE and MCX ‐ SX in all the major segments

viz. Cash, F & O and CDS segments. Further, NSPL is a Registered Portfolio Manager and

is registered with SEBI

• SEBI Registration Number: INH000004617

Details of Disciplinary History of NSPL No disciplinary action is / was running / initiated against NSPL

Research analyst or NSPL or its relatives'/associates' financial interest in the

subject company and nature of such financial interest

No (except to the extent of shares held by Research analyst or NSPL or its

relatives'/associates')

Whether Research analyst or NSPL or its relatives'/associates' is holding the

securities of the subject companyNO

Research analyst or NSPL or its relatives'/associates' actual/beneficial

ownership of 1% or more in securities of the subject company, at the end of

the month immediately preceding the date of publication of the document

NO

Research analyst or NSPL or its relatives'/associates' any other material

conflict of interest at the time of publication of the documentNO

Has research analyst or NSPL or its associates received any compensation

from the subject company in the past 12 monthsNO

Has research analyst or NSPL or its associates managed or co‐managed public

offering of securities for the subject company in the past 12 monthNO

Has research analyst or NSPL or its associates received any compensation for

investment banking or merchant banking or brokerage services from the

subject company in the past 12 months

NO

Has research analyst or NSPL or its associates received any compensation for

products or services other than investment banking or merchant banking or

brokerage services from the subject company in the past 12 months

NO

Has research analyst or NSPL or its associates received any compensation or

other benefits from the subject company or third party in connection with the

document.

NO

Has research analyst served as an officer, director or employee of the subject

companyNO

Has research analyst or NSPL engaged in market making activity for the

subject companyNO

Other disclosures NO

Rating Legend

Strong Buy More than 15%

Buy 5% - 15%

Hold 0 – 5%

Reduce -5% - 0

Sell Less than -5%

Reliance Industries Ltd.

Date CMP (INR) Target Price (INR) Recommendation

October 22, 2018 1101 1434 Strong Buy

July 30, 2018 1129 1327 Strong Buy

Reliance Industries Ltd | Q2FY19 - Result Update | Page 9




Reliance Industries Ltd. - Nalanda Securitiesat Reliance Retail stores during this period. JIO...

Documents

Transcript of Reliance Industries Ltd. - Nalanda Securitiesat Reliance Retail stores during this period. JIO...