RELIANCE INDUSTRIES LIMITED January 29, 2018 Current Price: ` 964.55 STOCK DATA BSE Code 500325 NSE Symbol RELIANCE Reuters RELI.BO Bloomberg RIL IN VALUE PARAMETERS Price (Rs) 964.55 52 W H/L(Rs) 990.00/508.05 Mkt. Cap.(Rs Cr) 610958.5 Latest Equity(Subscribed) 6334.13 Latest Reserve (cons.) 256795.67 Latest EPS (cons.) -Unit Curr. 53.4 Latest P/E Ratio -cons 18.06 Latest Bookvalue (cons.) -Unit Curr. 430.64 Latest P/BV - cons 2.24 Dividend Yield -% 0.53 Face Value 10.00 SHARE HOLDING PATTERN (%) Description as on % of Holding 31/12/2017 Foreign 26.78 Institutions 11.12 Govt Holding 0.14 Non Promoter Corp. Hold. 2.63 Promoters 46.2 Public & Others 13.14 Consolidated Results Qtr Ending Qtr Ending In Cr. Dec. 17 Dec. 16 VAR % Net Sales 102500.00 84189.00 22 OPM% 17.20 13.70 OP 17588.00 11574.00 52 Other Income 2218.00 2736.00-19 PBIDT 19806.00 14310.00 38 Interest 2095.00 1204.00 74 PBDT 17711.00 13106.00 35 Depreciation 4530.00 2793.00 62 PBT 13181.00 10313.00 28 Tax 3775.00 2716.00 39 PAT 9406.00 7597.00 24 Share of profit/(loss) of associates 39.00-73.00 LP Minority interest -22.00 9.00 Consolidate Net Profit 9423.00 7533.00 25 EPS (Rs) 14.88 23.22 Reliance Industries Ltd.'s third-quarter net profit of a record Rs 9,423 crore beats street estimates. Reliance Industries Limited (RIL) reported 25% increase in consolidated net profit to Rs 9423 crore in Q3FY'18 compared to Q3FY'17 which was higher than the estimates while net sales were up 22% to Rs 102500 crore. Increase in revenue is primarily on account of volume increase with start-up of petrochemicals projects and increase in prices in refining and petrochemical businesses. The increase in consolidated revenues reflects robust growth of 116% in Retail business and continued enhancement in Jio's wireless operations. Exports (including deemed exports) from India were higher by 21.3% at Rs 46,151 crore as against Rs 38,038 crore in the corresponding period of the previous year due to higher export of petrochemical products and product prices in refining and petrochemical business. GRM during the quarter stood at $ 11.6/bbl - outperforming Singapore benchmark by $ 4.4/bbl as against $ 10.8/bbl in the previous year quarter and quarterly crude throughput was 17.7 MMT compared to 17.8 MMT in Q3FY'17. KG-D6 production stood at 4.9 MMSCMD in Q3FY'18 compared to 7.5 MMSCMD in Q3FY'17. Operating profit before other income and depreciation increased 52% to Rs 17,588 crore from Rs 11,574 crore in the corresponding period of the previous year. Strong operating performance was driven by growth in petrochemicals, retail and digital services businesses along with firm refining margins. Other expenditure increased by 38.4% to Rs 14,169 crore as against Rs 10,236 crore in corresponding period of the previous year primarily due to network expenses, access and regulatory charges pertaining to digital services business (Rs 3,411 crore) and higher power and fuel expenses primarily due to commissioning of new projects at Jamnagar (Rs 991 crore). Depreciation (including depletion and amortization) was Rs 4,530 crore as compared to Rs 2,793 crore in corresponding period of the previous year. The increase of Rs 1,191 crore was on 1
Consolidated Segment Results Particulars Qtr Ending Dec.17 Qtr Ending Dec.16 % to total Var. (%) Revenue: Petrochemicals 33726.00 22854.00 24 48 Refining 75865.00 61693.00 54 23 Oil & Gas 1631.00 1215.00 1 34 Organized retail 18798.00 8688.00 13 116 Digital Service 8136.00 139.00 6 5753 Others 3026.00 2017.00 50 Total 141182.00 96606.00 98 46 Less: Inter Segment Revenues 31277.00 12417.00 152 Less: GST recovered 7405.00 0.00 Net Revenue from Operation 102500.00 84189.00 22 PBIT Petrochemicals 5753.00 3326.00 42 73 Refining 6165.00 6194.00 45 0 Oil & Gas -291.00-295.00-2 -1 Organized retail 487.00 231.00 4 111 Digital Service 1440.00-8.00 10-18100 Others 235.00 77.00 205 PBIT 13789.00 9525.00 98 45 Segment Assets Petrochemicals 118304.00 103675.00 15 14 Refining 195930.00 174282.00 25 12 Oil & Gas 41642.00 40882.00 5 2 Organized retail 23379.00 11257.00 3 108 Digital Service 234986.00 176399.00 Others 23056.00 18861.00 3 22 Unallocated 140472.00 141917.00 18-1 Total Segment Assets 777769.00 667273.00 70 17 Segment Liabilities Petrochemicals 62019.00 52229.00 8 19 Refining 161293.00 112954.00 21 43 Oil & Gas 59358.00 67557.00 8-12 Organized retail 15061.00 6225.00 2 142 Digital Service 138061.00 122806.00 18 12 Others 2959.00 3500.00-15 Unallocated 339018.00 302002.00 44 12 Total Segment Liabilities 777769.00 667273.00 100 17 account of commencement of commercial operations of RJIL's Wireless Telecommunication Network. The capitalization of new projects in the petrochemicals business also resulted in increase in depreciation. Finance cost was at Rs 2,095 crore as against Rs 1,204 crore in corresponding period of the previous year. This increase is primarily due to lower capitalization of finance cost related to commencement of digital services business (Rs 712 crore) and higher loans balance partially offset by exchange rate variation during the quarter. Profit after tax was higher by 25.1% at Rs 9,423 crore as against Rs 7,533 crore in the corresponding period of the previous year. 2
Outstanding debt as on 31st December 2017 was Rs 213,206 crore compared to Rs 196,601 crore as on 31st March 2017. Cash and cash equivalents as on 31st December 2017 were at Rs 78,617 crore compared to Rs 77,226 crore as on 31st March 2017. The capital expenditure for the quarter ended 31st December 2017 was Rs 17,336 crore including exchange rate difference capitalization. Capital expenditure was principally on account of Digital Services business, balance of expenditure for projects in the petrochemicals and refining business at Jamnagar and in Organized Retail business Segment wise revenue from the Refining and Marketing segment increased by 23% Y-o-Y to Rs 75,865 crore aided by 24% higher Brent oil prices. Segment EBIT marginally decreased by 0.5% Y-o-Y to Rs 6,165 crore. Gross Refining Margins (GRM) for 3Q FY18 stood at $11.6/bbl as against $ 10.8/bbl in 3Q FY17. RIL's GRM outperformed Singapore complex refining margins by $ 4.4/bbl. 3Q FY18, revenue from the Petrochemicals segment increased 47.6% Y-o-Y to Rs 33,726 crore due to higher volumes and prices. Petrochemicals segment EBIT was at a record level of Rs 5,753 crore supported by strong volume growth, higher margins for Polypropylene and downstream polyester products. The volume growth was led by the world's largest ROGC coming on-stream along with downstream LDPE, LLDPE and MEG plants. 3Q FY18, revenue for the Oil & Gas segment increased 34.2% Y-o-Y to Rs 1,631 crore due to commencement of CBM production and higher oil and gas price realisation. Segment EBIT was at Rs (291) crore as against Rs (295) crore in the corresponding period of the previous year. Domestic production was lower at 19.7 BCFe, down 15% Y-o-Y whereas production in US Shale operations declined by 14% to 32.4 BCFe. Retail segment revenue for 3Q FY18 grew by 116.4% Y-o-Y to Rs 18,798 crore from Rs 8,688 crore. The business delivered strong PBDIT of Rs 606 crore in 3Q FY18 as against Rs 333 crore in the corresponding period of the previous year. Network18 Media & Investments Limited reported 3Q FY18 consolidated (Ind-AS) revenue of Rs 366 crore (down 2% Y-o-Y, dragged by TV shopping business) and EBIT at Rs 57 crore. Business Environment update Domestic Oil and Gas Operation 3Q FY18 revenues for domestic E&P operations of Rs 752 crore reflect a 21% Y-o-Y increase due to commencement of CBM production and higher oil and gas price realisation. Segment EBIT for the quarter stands at Rs (91) crore vs Rs (125) crore during 3Q FY17. KG-D6 field produced 0.175 MMBBL of crude oil and 16.0 BCF of natural gas in 3Q FY18, a reduction of 33% and 34% respectively on a Y-o-Y basis. Panna-Mukta fields produced 1.32 MMBBL of crude oil and 15.2 BCF of natural gas in 3Q FY18, a reduction of 10% in crude oil and 3% in natural gas on Y-o-Y basis. Gas production from CBM field is under ramp-up; the field produced 2.44 BCF of gas as compared to 1.63 BCF in the trailing quarter. Oil & Gas (US Shale) During 3Q CY17 (consolidated with 3Q Fy18), financial performance was lower Q-o-Q as realization were lower by 13% Q-o-Q, mainly due to wider differentials in Marcellus JVs and lower Henry Hub prices. This in combination with lower Q-o-Q production impacted financial performance. On a Y-o-Y basis, though prices are better, volumes remained lower reflecting in lower revenue and EBIT. The quarter of 3Q FY18 was good for liquid markets, with both oil and NGL prices witnessing a robust increase. WTI oil prices were $55.4/bbl vs. $48.2/bbl in 2QFY18. NGL realizations improved on strong domestic demand for Propane and increased export. 3
Market for gas was moderate, where Henry Hub gas prices averaged 2% lower at $2.93/MMbtu. Marcellus differentials tightened Q-o-Q due to increased weather related demand in the latter part of the quarter. Refining and Marketing During 3Q FY18, RIL Jamnagar refineries processed 17.7 MMT of crude. The average refinery utilization rates globally in 3Q FY18 were 86.2% in North America, 87.6% in Europe and 88.3% in Asia. US refinery operations recovered from the hurricane related disruptions in the US Gulf coast during the previous quarter. Utilization in Europe was lower Q-o-Q as key product cracks weakened towards the end of the quarter. Higher utilization in Asia was in line with the seasonal trend. Global oil demand growth is estimated at 1.5 million barrels/day for 2017 driven by growth in China and other Asia-Pacific markets. The current forecast for global oil demand growth for 2018 is encouraging at 1.3 million barrels/day. RIL's exports of refined products from India were at $ 5.8 billion during the 3Q FY18 as compared to $ 4.9 billion in 3Q FY17. In terms of volume, exports of refined products were at 10.3 MMT during 3Q FY18 as compared to 10.6 MMT in 3Q FY17. During 3Q FY18, the benchmark Singapore complex margin averaged $ 7.2 /bbl as compared to $ 8.3 /bbl in 2Q FY18 and $ 6.7 /bbl in 3Q FY17. Lower gasoline, gasoil and fuel oil cracks Q-o-Q led to a marginally softer regional benchmark. Extension of OPEC/non-OPEC supply cuts, continued stock rebalancing, heightened geo-political risks and Forties pipeline outage led to increase in flat price (Dubai up $ 8.8 /bbl Q-o-Q and $ 11.1 /bbl Y-o-Y) during the quarter. Singapore gasoil cracks averaged $ 13.0 /bbl during 3Q FY18 as against $ 13.9 /bbl in 2Q FY18 and $ 12.1 /bbl in 3Q FY17. Higher gasoil exports from China driven by specification change for off-road diesel weighed on the regional cracks. Demand growth was stable in the Asia region including China and India. The gasoil demand growth in India was firm at 4.6% Y-o-Y in 3Q FY18. Asian naphtha cracks averaged $ 3.0 /bbl in 3Q FY18 as compared to $ (-0.2 /bbl) in 2Q FY18 and $ 0.3 /bbl in 3Q FY17. Naphtha cracks remained at elevated levels on the back of firm petrochemical feedstock demand amidst high LPG price. Fuel oil cracks averaged $ (-4.3 /bbl) in 3Q FY18 as compared to $(-2.5 /bbl) in 2Q FY18 and $ (-2.7 /bbl) in 3Q FY17 as fuel oil cracks fell across key trading hubs globally. While bunker demand was supportive, fuel oil demand in the power sector is facing challenge from substitution by natural gas in many countries including Iran, Egypt, and Pakistan. Arab Light- Arab Heavy crude differential widened to $ 2.3 /bbl in 3Q FY18 as compared to $ 1.5 /bbl in 2Q FY18 and $ 2.9 /bbl in 3Q FY17. The price for Brent, benchmark for light crude oil, was supported due to restricted supplies of Forties stream due to pipeline outage.mained firm. The gasoline demand growth in India was firm at 6.8% Y-o-Y in 3QFY18. Petrochemical Business Polymer & Cracker Crude oil prices touched near 3 year highs during the quarter (18% up on Q-o-Q basis) due to continuation of production cut and geo-political concerns. On the back of higher crude prices and firm demand, Asian naphtha prices were up by 25% Q-o-Q. Ethylene prices were up by 11% Q-o-Q due to higher feedstock prices, tight supply and healthy downstream demand. Propylene prices also gained by 4% Q-o-Q amid firm demand. Naphtha cracking margins were squeezed due to strong naphtha prices. However, light feed cracking margins expanded on Q-o-Q basis, benefiting RIL's ethane feed crackers. 4
PP prices were up by 5% and its margin over Propylene strengthened ($ 319/MT, up 7% Q- o-q) on account of healthy demand. PE prices were up by 6% but, margin over Naphtha weakened ($ 626/MT, down 6% Q-o-Q). PVC prices were marginally weak and the margin over EDC was lower by 3% ($ 582 / MT). Domestic polymer demand grew by 10% on Y-o-Y basis and 3% on Q-o-Q basis led by packaging and automobile segments. RIL's polymer production was up by 8% Q-o-Q to 1.27 MMT. LLDPE and LDPE capacities at Jamnagar achieved design throughput during the quarter. Polyester Chain Polyester chain margins further increased on Q-o-Q basis and were above 5 year average. PX prices were up 8% Q-o-Q, tracking higher crude prices. However, PX-Naphtha delta was lower ($ 312/MT, down 9% Q-o-Q) as delay in start-ups of new PTA capacities impacted PX demand. PTA markets remained healthy amidst consistent downstream demand and tight supplies. Planned turnarounds at major capacities and unexpected delay in restart of idled units aided fundamentals. Consequently, PTA prices rose 6% Q-o-Q; however PTA-PX delta weakened ($ 126/MT, down 4% Q-o-Q) with firm feedstock prices. Delta continued to remain above 5 year average. MEG prices firmed due to robust demand and tight supplies and speculative sentiments. However, margin over Naphtha weakened ($ 531/MT down 7% Q-o-Q). MEG delta was up 22% on a Y-o-Y basis and remain above 5 year average. Polyester demand remained unchanged as producers maintained high plant utilization rates amidst low inventory. Operating rates of polyester fibre and yarn plants in China improved and were in range of 89%-95%. PFY prices rose 5% Q-o-Q and delta firmed up by 6% to $ 313/MT. Chinese ban on post-consumer PET imports effective 2018 supported virgin PSF markets. PSF prices improved by 8% Q-o-Q resulting in 23% increase in PSF delta to $ 249/MT; surpassing the 5 year average. Global PET markets remained tight despite this being a traditionally lull season due to disruption in few plant operations in the West. Asian sellers maintained high operating rates during the quarter. PET prices gained 6% Q-o-Q with improved delta of 12% Q-o-Q to $ 161/MT. During 3Q FY18, domestic polyester demand gradually stabilised post implementation of GST. GoI's initiative to reduce GST rate for PFY and Spun yarn to 12% bolstered the market sentiments complimenting the demand growth. Filament markets geared up their operations amidst improved demand for winter wear (demand up by 7% Q-o-Q). PET demand witnessed 17% increase Q-o-Q. Industry exports improved over last year aiding high operating rates. MEG capacity at Jamnagar achieved design throughput. Fibre intermediate production during 3Q FY18 increased by 35% Y-o-Y to 2.3 MMT while Polyester production rose 5% Y- o-y to 0.62 MMT. Organized Retail Revenues for 3Q FY18 grew by 116.4% Y-o-Y to Rs 18,798 crore from Rs 8,688 crore. PBDIT for 3QFY18 grew by 82.0% Y-o-Y to Rs 606 crore from Rs 333 crore. During the quarter, Reliance Market launched its 43rd store at Mysore. Reliance Trends crossed a milestone of 400 stores during the quarter with 25 new store additions in 3Q Fy18. 5
Reliance Retail added 72 stores during 3Q FY18 and operates 3,751 stores across 750 cities with an area of over 14.50 million sq. ft. and 479 petro outlets as on 31st December, 2017. Media Business Network18 Media & Investments Limited reported 3QFY18 consolidated (Ind-AS) revenue of Rs 366 crores (down 2% YoY, dragged by TV shopping business) and EBIT at Rs 57 crore A recovery in the overall advertising environment has helped broadcasting subsidiary TV18 post 8% Y-o-Y revenue growth. The digital content cluster posted a 14% Y-o-Y revenue growth, with flagship properties growing their engagement and monetization substantially. Management Comments Commenting on the results, Mukesh D. Ambani, Chairman and Managing Director, Reliance Industries Limited said: "I am happy to share record-setting consolidated quarterly earnings to mark the 40th anniversary of Reliance's listing in January 1978. Fittingly, this quarter marks the culmination of our petrochemical expansion projects and the first positive net profit contribution from our newest business line Digital Services. Our refining business has delivered 12 consecutive quarters of double-digit refining margins, demonstrating operating excellence and healthy industry fundamentals. Benefits of the large investments in petrochemical business are beginning to show with the segment reporting its highest ever earnings. I would like to thank all our customers for partnering with us in this revolution which has made India a global digital powerhouse. I congratulate all our employees and partners for the strong performance. Our commitment is to keep pushing newer innovative products which would radically transform customer lives and generate huge societal value. Jio's strong financial result reflects the fundamental strength of the business, significant efficiencies and right strategic initiatives. Jio has demonstrated that it can sustain its strong financial performance. We are excited about the prospects of both our energy and consumer businesses due to strong growth in Indian markets and constructive macro environment." 6
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