Narnolia Securities Ltd. ADITYA GUPTA 19-Sep-17. Key Highlights of the Report: RoE to maintain over 13%

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Sep-1 Oct-1 Nov-1 Dec-1 Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- 19-Sep- INDUSTRY - OIL & GAS BSE Code - 500325 NSE Code - RELIANCE NIFTY - 1018 Company Data CMP 84 Target Price 900 Previous Target Price 840 Upside % 52wk Range H/L Mkt Capital (Rs Cr) Av. Volume (,000) RoE to maintain over 13% 14% 13% 12% 11% 15 155 145 135 125 115 105 Share Holding patterns % Key Highlights of the Report: Financials/Valu FY15 FY1 FY FYE FY19E Net ation Sales 3,75,435 2,93,298 3,30,0 4,43,483 4,93,34 EBITDA 37,34 41,704 4,194 8,392 7,153 EBIT 31,114 33,927 40,142 54,437 0,833 PAT 23,5 29,81 29,833 40,049 44,755 1QFY 4QFY 3QFY EPS (Rs) 73 92 92 124 138 Promoters 4.3 4.3 4.5 EPS growth (%) 5% 27% 0% 34% 12% Public 53.7 53.7 53.5 ROE (%) 11% 13% 11% 13% 13% Total 100 100 100 ROCE (%) 8% 8% 8% 11% 11% 95 85 75 5 9% 8% 13% 11% BV 75 715 814 941 1,02 Stock Performance % P/B (X) 1.2 1.5 1.5 1.3 1.2 1Mn 3Mn 1Yr P/E (x) 11.3 11.3 13.5 10.1 9.0 Absolute 7.3 24.5 3. Rel.to Nifty 4.3 19.7 50.9 RECENT DEVELOPMENT: Commencement of Ethane Project RELIANCE ROE 13% 13% ADITYA GUPTA aditya.gupta@narnolia.com 81/45 5,50,730 FY1 FY FYE FY19E NIFTY 49 Reliance Industries Ltd has successfully commissioned the last crystallisation train (Train 3) of the paraxylene (PX) complex at Jamnagar which will improve the volume of petro-chemicals segment. Launched Jio Phone with the target to double its subscriber base and cover 99% of country's population. Reliance out-performed Singapore GRM by 5.5 USD/BBL and reported GRM of 11.9 USD/BBL. Reliance Retail added stores across various store concepts and now it is operating 334 stores in 703 cities. Currently, the stock is trading at 1.8x FY P/BV. We maintain HOLD' with the target price of Rs. 900 Reliance commissions ethane receipt & handling facilities, at its Dahej Manufacturing Facility in Gujarat in a world record time of less than three years RIL commissions final phase of Jamnagar paraxylene project at a cost of $ 1 million. Commercial production of natural gas from coal seams or CBM from its Madhya Pradesh blocks.company is targeting 3.5 million SCM per day of peak output from two adjacent CBM blocks in Sohagpur. Reliance Retail may spend Rs 2,500 cr for business expansion in next 3 years.the company also has plans to add 500 to 00 fuel stations. Reliance Industries has completed sale of its entire 7 percent interest in its East African company GAPCO to Total SA of France for an undisclosed sum.

Quarterly Performance Financials 1QFY 2QFY 3QFY 4QFY 1QFY YoY % QoQ% FY1 FY YoY % Total Volumes ('000) 4% 0% 70 70 1% GRM(USD/BBL) 11.5 10.1 10.8 11.5 11.9 3% 3% 11 11 2% Net Sales 71,451 81,51 84,9 92,889 90,537 27% -3% 2,93,298 3,30,0 13% Other Income 2,378 2,393 2,73 1,93 2,124-11% 7,479 9,443 2% COGS 49,519 59,39 0,48 7,97 5,19 32% -4% 2,08,113 2,37,098 14% Employee Cost 2,111 2,0 1,894 2,3 2,455 1% 4% 7,407 8,388 13% Other Expenses 8,598 9,02 10,257 10,593 10,332 20% -2% 3,074 38,500 7% EBITDA 11,223 11, 11,552 12,233 12,554 12% 3% 41,704 4,194 11% Depreciation 2,725 2,774 2,793 3,354 3,037 11% -9% 11,55 11,4 1% Interest 1,20 893 1,209 55 1,119-7% 101% 3,91 3,849 4% PBT 9,70 9,902 10,28 10,259 10,522 9% 3% 33,927 40,142 % Tax 2,581 2,708 2,719 2,201 2,544-1% 1% 8,87 10,201 15% PAT 7,113 7,20 7,50 8,053 9,079 28% 13% 29,81 29,833 0% Robust volume growth accompanied by highest GRM of 11.9 USD/BBL Reliance has outperformed singapore GRM by USD 5.5 /BBL. Reliance reported Rs.90537 crore of net sales in 1QFY a growth of 27% over same quarter previous year. This was driven by growth in organised retail and petro-chemicals business. EBITDA for 1QFY is Rs. 12554 Cr. a growth of 12% over same quarter previous year.ebitda margin in 1QFY stood at 13.8% Reliance has reported GRM of 11.9 USD/BBL in 1QFY despite weakening in gasoline/diesel cracks and lower light- heavy and Brent-Dubai spreads, Higher GRM is achieved due to better yield/crude optimization and risk management. Profit after tax for 1QFY is Rs. 9079 Cr a growth of 28% over same quarter previous year. The capital expenditure for the year ended 30th June 20 was Rs. 25192 crore Reliance Jamnagar refineries processed.3 MMT crude in 1Q FY, vs.8 MMT crude processed in the previous quarter.. Reliance operated 1,238 petroleum retail outlets in the country in 1QFY Refining EBIT(Rs in CR) EBIT Margins(%) RIL GRM(USD/bbl) Singapore GRM(USD/bbl) 8,000 7,000,000 5,000 4,000 3,000 2,000 1,000-14% 12% 8% % 4% 2% 0% 14 12 10 8 4 2 0 8 5 7 10 10 11 9 8 12 11 11.5 10 8 8 7 5 11 7 12 12

Lower depreciation improves PAT Margin % 1QFY 2QFY 3QFY 4QFY 1QFY YoY(+/-) QoQ(+/-) FY1 FY YoY(+/-) Gross Margin 31% 27% 28% 27% 28% 0.91 1.03 29% 28% 0.97 EBITDA Margin 1% 14% 14% 13% 14% 0.88 1.05 14% 14% 0.98 PAT Margin 9% 9% 9% 1.01 1.1 9% 0.89 Gross Margin improved to 28% due to higher refining margins of Oil & Gas exploration business in 1QFY. EBITDA grew by 11.9% QoQ to Rs.12554 crore. But EBITDA Margin improved by 70bps QoQ to 13.9% on account of lower purchase cost of raw material. PAT margin grew by 130bps to QoQ on account of lower depreciation cost and improved margins in 1QFY. EBITDA(Cr.) EBITDA % 14000 12000 10000 8000 000 4000 2000 0 20% % 1% 14% 12% 8% % 4% 2% 0% Volume Trend Petrochemicals volume (MMT) Crude Oil Refined..5.4.3.2.1.0.2.4.3.1.4.2.2.5 19 5.9 1 Petro-chemicals volume grew 4% QoQ to.5 MT in 1QFY and grew by % YoY primarily due to commissioning of paraxylene project. Crude oil refined in 1QFY is.5 MT vs 1.8 MT in the same quarter of FY.

Investment Arguments: Expanding organised retail base- During the quarter, Reliance Retail added stores across various store concepts. At the end of the year, Reliance Retail operated 3,34 stores across 703 cities with an area of over 13.8 million square feet. Re-commissioning of Petroleum outlets- Reliance continue to re-commission its retail petroleum network; 1233 outlets are now operational. All petro outlets are fully automated with real time monitoring and control systems and implemented daily price change. Strong Petro-chemicals Demand- Polymer demand registered growth of 7% during FY. PVC demand registered highest growth rate of YoY. Commercialisation of Jio- Jio reached 130 Million subscribers till 1QFY. This is the fastest achieved by any start-up technology company in the world. Jio has launched Jio Phone with the target of doubling its subscriber base in upcoming years. Commissioning of new PX facility at Jamnagar - Full commissioning of new PX facility at Jamnagar during the quarter will strengthen the integration within polyester chain. Ramp-up of ethane import project has helped in diversifying feedstock sources and mitigating risks for existing crackers at Dahej and Hazira. Segment performance Revenue Segment Margins Refining business Petro-chemicals E&P Retail Refining business Petro-chemicals E&P Retail 80000 70000 0000 50000 40000 30000 20000 10000 0 2QFY 3QFY 4QFY 1QFY 20% 0% - -20% -30% -40% 2QFY 3QFY 4QFY 1QFY View & Valuation Reliance is aggressively expanding its footprint across different business segments through launch of Jio, re-opening of retail outlets, expanding network of organized retail and capacity expansion of petro-chemicals project at Jananagar complex. Reliance Jio and retail will remain the key growth drivers for Reliance in FY. Jio has reached customer base of 12.5Crore with 10Crore paid subscribers base. With the Reliance JIO s entry into feature phones, subscriber base is expected to double in next 2 years. Commissioning of highly competitive core projects will bring turnaround to the financials of the company going ahead. Further the upcoming mega PX (paraxylene) project and integrated highly profitable petcoke gasification project will improve profitability of the business going further. Reliance refining business is also contributing significantly to the profitability of the company with the GRM of USD 11.9/bbl which is 9 year s high. The successful commissioning of RIL s Paraxylene complex will likely to boost volume going ahead. We expect company to maintain ROE of 12% in FY. Currently, the stock is trading at 1.8x FY P/BV. We maintain positive view on this stock and recommend HOLD rating in this stock with the target price of Rs.900.

Financials Snap Shot Income Statement Rs in Crores Key Ratios Y/E March FY1 FY FYE FY19E FY1 FY FYE FY19E Revenue from Operation 2,93,298 3,30,0 4,43,483 4,93,34 ROE 13% 11% 13% 13% Change (%) -22% 13% 34% 11% ROCE 8% 8% 11% 11% EBITDA 41,704 4,194 8,392 7,153 Asset Turnover 0.5 0.5 0. 0. Change (%) 12% 11% 48% 11% Debtor Days 5.5 5.5 5.5 5.5 Margin (%) 14% 14% 15% 15% Inv Days 57.9 57.9 57.9 57.9 Depr & Amor. 11,55 11,4,357 19,81 Payable Days 75 75 75 75 EBIT 30,139 34,548 51,035 5,291 Int Coverage 8. 8.98 12.9 14.29 Int. & other fin. Cost 3,91 3,849 3,939 3,939 P/E 11 14 10 9 Other Income 7,479 9,443 7,341 8,480 Price / Book Value 1.5 1.5 1.3 1.2 EBT 33,927 40,142 54,437 0,833 EV/EBITDA 11 12 8 7 Exp Item 4,574 - - - FCF per Share (30) (204) 2 39 Tax 8,87 10,201 14,388 1,077 Div Yield 1% 1% 1% 1% Minority Int & P/L share of Ass. 23 (108) - - Reported PAT 29,81 29,833 40,049 44,755 Assumptions Adjusted PAT 2,484 29,833 40,049 44,755 FY1 FY FYE FY19E Change (%) 27% 0% 34% 12% Crude Refined(Million Tonnes) 70 70 74 80 Margin(%) 9% 9% 9% Petrochemicals Production(MMT) 25 25 25 2 Balance Sheet Rs in Crores Y/E March FY1 FY FYE FY19E Total Oil volume(pmt+kd-d)(m 8 8 8 8 Total Gas volume(pmt+kd-d)( 208 4 4 4 Share Capital 2,948 2,959 2,948 2,948 Cash Flow Statement Rs in Crores Reserves 2,28,08 2,0,750 3,01,9 3,41,128 Y/E March FY1 FY FYE FY19E Networth 2,31,55 2,3,709 3,04,8 3,44,07 PBT 38,737 40,034 39,009 45,595 Debt 15192 37 12 12 (inc)/dec in Working Capital 38,887 44,0 0,305 9,395 Other Non Cur Liab 2,249 9,025 3,401 3,785 Non Cash Op Exp 11,55 11,4,357 19,81 Total Capital Employed 39748 447385 48047.9 525257.8 Int Paid (+) 3,849 3,939 3,939 - Net Fixed Assets (incl CWIP) 409353 5471 537523.2 542 Tax Paid (10,083) (10,427) (12,045) - Non Cur Investments 41,512 25,39 25,39 25,39 others 7,829 15,43 (,305) (9,14) Other Non Cur Asst 14,01 8,279 8,279 8,279 CF from Op. Activities 38,134 49,550 31,574 48,204 Non Curr Assets 4,71,212 5,59,989 5,79,041,0,0 (inc)/dec in FA & CWIP (4,898) (78,109) (3,409) (47,000) Inventory 4,48 53,40 70,289 78,238 Free Cashflow (8,74) (28,559) (4,835) 1,204 Debtors 4,45 8,7,751 7,515 (Pur)/Sale of Inv 5,848 9,230 - - Cash & Bank 11,028 3,023,223 9,352 others 3,009 1,081 - - Other Curr Assets 1,345 19,871 24,715 27,509 CF from Inv. Activities (3,190) (,292) (3,409) (47,000) Curr Assets 1,27,785 1,4,813 1,70,53 1,95,31 inc/(dec) in NW 283 92 - - Creditors 0,29 7,595 91,1 1,01,481 inc/(dec) in Debt 12,980 20,781 (2,494) - Provisons 3,00 4,120 5,035 5,338 Int. Paid (9,224) (12,920) (3,939) (3,939) Other finicial liabilities 89,533 1,04,543 1,04,543 1,04,543 Div Paid (inc tax) (7,259) (53) (3,542) (4,157) Other Curr Liab 10,005 20,882 15,128 1,839 others 10 1 - - Curr Liabilities 1,1,09 2,03,789 2,13,52 2,25,850 CF from Fin. Activities (3,210) 8, (9,975) (8,09) Net Curr Assets (33,824) (5,97) (42,990) (30,535) Inc(Dec) in Cash (1,2) (8,125) (14,810) (,892) Total Assets 598997 70802 749577 80149 Add: Opening Balance 12,289 11,114 3,023,223 Closing Balance 11,023 2,989 (11,787) (9)

N arnolia Securities Ltd 201 2nd Floor Marble Arch Building 23B-AJC Bose Road Kolkata-700 020, Ph : 033-40501500 email: narnolia@narnolia.com, website : www.narnolia.com Risk Disclosure & Disclaimer: This report/message is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you.. (Hereinafter referred as NSL) is not soliciting any action based upon it. This report/message is not for public distribution and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any from. The report/message is based upon publicly available information, findings of our research wing East wind & information that we consider reliable, but we do not represent that it is accurate or complete and we do not provide any express or implied warranty of any kind, and also these are subject to change without notice. The recipients of this report should rely on their own investigations, should use their own judgment for taking any investment decisions keeping in mind that past performance is not necessarily a guide to future performance & that the the value of any investment or income are subject to market and other risks. Further it will be safe to assume that NSL and /or its Group or associate Companies, their Directors, affiliates and/or employees may have interests/ positions, financial or otherwise, individually or otherwise in the recommended/mentioned securities/mutual funds/ model funds and other investment products which may be added or disposed including & other mentioned in this report/message.