Reliance Industries
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
RIL IN
6,339
9300.1 / 120.4
1618 / 876
24/15/19
16275
2 May 2020
4QFY20 Results Update | Sector: Oil & Gas
CMP: INR1,467
TP: INR1,618 (+10%)
Buy
Tech and consumer businesses – the new core
RIL’s 4QFY20 consol. and standalone EBITDA were in line with our estimates,
however, the company has recorded its first ever inventory loss in the O2C
business, which has led to a PAT miss.
RJio’s revenue was up 6% QoQ to INR148b (5% miss) led by 1.7% increase in ARPU
to INR131 (v/s est. INR137) due to the price hike taken in Dec’19; subscribers
grew 5% QoQ to 387.5m.
The increase is ARPU was lower than our estimate likely due to the higher
proportion of low ARPU Jiophone customer addition, which may have dragged
blended ARPU by 2-3%. The benefit of the price hike has not been fully captured
yet with incremental benefit expected to accrue in FY21E of 15/20%.
FY20 consol. EBITDA grew 4% YoY to INR879b with adj. PAT up 8% YoY to
INR433b. RJio gained from strong subscriber led revenue growth, driving 43%
EBITDA growth in FY20. Reliance Retail’s EBITDA surged 56% on revenue growth
of 26% coupled with healthy 190bp margin improvement.
On the other hand, standalone EBITDA was down 12% YoY to INR519b (led by 4%
YoY decline in GRMs and 18% YoY decline in petchem EBITDA/mt). Adj. PAT
declined 3% YoY to INR342b (due to lower depreciation and higher other income)
RIL is moving quickly to realize its plan of becoming net debt free by end-FY21.
The company is now poised to receive ~INR1,037b through rights issue, the
Facebook-Jio deal and the Fuel retailing JV with BP in the coming quarters.
The contribution from standalone business to consol. EBITDA has declined to 60%
in FY20 from 85% in FY15. Higher debt in the standalone business as well as
better valuations for Tech/Consumer businesses (together account for 78% of
valuations) leads us to believe these two segments are the new core.
We value RIL at INR1,618/share (from earlier INR1,589) based on SOTP with
equity values of INR358/share (earlier INR353) for the core business,
INR500/share (earlier INR450) for Reliance Retail and INR760/share (earlier
INR750) for RJio. Maintain Buy.
Financials & Valuations (INR b)
Y/E March
2020E 2021E
Net Sales
5,957 5,358
EBITDA
879
902
Net Profit
432
421
Adj. EPS (INR)
68.1 66.4
EPS Gr. (%)
8.4
-2.5
BV/Sh. (INR)
715.1 776.7
Ratios
0.6
0.5
Net D:E
RoE (%)
10.3
8.9
RoCE (%)
8.5
7.7
Payout (%)
11.6
7.3
Valuations
P/E (x)
21.5 22.0
P/BV (x)
2.0
1.9
EV/EBITDA (x)
13.5 13.2
EV/Sales (x)
2.0
2.2
Div. Yield (%)
0.4
0.3
Shareholding pattern (%)
As On
Dec-19 Sep-19
Promoter
48.9
48.9
DII
13.6
14.2
FII
26.3
25.6
Others
11.2
11.4
FII Includes depository receipts
2022E
6,873
1,197
622
98.1
47.8
867.2
0.3
11.9
9.9
7.8
14.9
1.7
9.4
1.6
0.4
Dec-18
46.2
12.2
25.7
16.0
Decline in debt could result in next leg of rerating
Standalone debt net of cash and current investments has risen from
INR938b in FY19 to INR1,516b driven by transfer of INR1,080b of debt from
telecom and partial repayments. Consol. net debt is marginally up from
INR1,852b in FY19 to INR1,876b in FY20.
While the stake sale is expected to fetch INR436b, the company is creating a
separate O2C business and is looking forward to another transaction of a
similar magnitude. The RIL-BP joint venture is also expected to be
concluded soon, which should fetch INR70b. This is in addition to the rights
issue of INR531b and PAT + Depreciation of INR664b in FY21 (capex of
INR500b), which would easily take the company to net debt free status and
may drive the next leg of rerating for the company.
Swarnendu Bhushan- Research analyst
(Swarnendu.Bhushan@MotilalOswal.com); +91 22 6129 1529
Aliasgar Shakir – Research analyst
(Aliasgar.Shakir@MotilalOswal.com); +91 22 6129 1565
Sarfraz Bhimani - Research Analyst
(Sarfraz.Bhimani@MotilalOswal.com); +91 22 6129 1566
2 May
Oswal
Motilal
2020
research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P
1
Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.