Result Analysis : Reliance Industries – Q2FY21
Total revenue from operations at 128,385 Cr
165,228 Cr (-22.95%) YoY | 100,929 Cr (27.32%) QoQ
Six month revenue 229,314 Cr Vs. 339,315 Cr (-32.48%)
Net Profit of 10,602 Cr
11,352 Cr (-6.63%) YoY 13,248 Cr (-19.94%) QoQ
Six month profit 23,850 Cr Vs. 21,493 Cr (10.91%)
Before exceptional Item:
EPS (in Rs) 14.68
18.47 YoY |12.89 QoQ
Before exceptional item:
Six month EPS 27.39 Vs. 35.03
View:
Result is in line with the market expectation. YoY revenue declined
and profit also declined due to impact of their petroleum & gas
business in YoY and QoQ which is partially offset by strong performance
by Reliance JIO and retail business. Quarter ending June 2020 profit
was higher by INR 4.9K Crs towards exceptional gain so net profit was
not comparable with Q2FY21. H1FY21 profit was also higher by said
amount.
Business Updates & Highlights
EBITDA
(Cons.) before exceptional items for the quarter was INR 23,299 crore
Vs. 25,766 Cr Vs. 21,585 Cr in QoQ therefore declined by 9.5% in YoY and
up by 7.9% in QoQ.
Finance cost was around INR 6,084 Cr Vs.
5,450 Cr in YoY Vs. 6,735 Cr in QoQ therefore up by 11.6% in YoY and
declined by 9.65 in QoQ.
Exports (including deemed exports) from
RIL’s India operations in Q2FY21 was INR 34,581 crore as against INR
53,161 crore in Q2FY20 Vs. 32,581 Cr in Q1FY21 therefore declined by
34.9% in YoY and up by 5.6% in QoQ.
Reliance Jio
Revenue
including access revenues for the quarter was INR 21,708 crore VS.
14,562 Cr in YoY Vs. 20,277 Cr in QoQ therefore up by 49% in YoY and
7.1% in QoQ.
EBITDA for the quarter was INR 7,971 crore Vs.
5,166 Cr Vs. 7,332 Cr and increase of 55.4% YoY and 8.7% in QoQ. EBITDA
Margin was around 43.1% Vs. 41.8% Vs. 42.5% in QoQ therefore up by 130
bps in YoY and 60 bps in QoQ.
H1FY21 EBITDA was around INR 15,303 Cr and EBITDA margin was around 42.8%.
Net
profit in Q2FY21 was INR 3,020 Cr Vs 990 Cr in Q1FY20 Vs. 2,520 Cr in
Q1FY21 therefore up by 205% in YoY and 19.8% in QoQ. H1FY21 Net profit
was INR 5,540 Cr.
Total Customer base as on 30th June 2020 of 405.6 million. Largest customer base in country.
RELIANCE JIO Q1 ARPU RS 145 Vs. 120 in Q2FY20 Vs. 140.3 in Q1FY21. Its improved in YoY and QoQ.
Total wireless data traffic during the quarter of 1,442 crore GB Vs. 1,420 Cr (1.5% QoQ growth).
Wireless
gross addition showed a strong sequential increase to 27.2 million as
lockdown restrictions began to ease during the quarter.
JPL has
completed the fund raising of INR 152,056 crores across thirteen global
investors which includes Facebook, Google etc. All of these investments,
excluding Google, have been completed post fulfilling applicable
conditions and total amount of INR 118,319 crore has been received by
the Company.
Reliance Retail
Revenue for the quarter
was INR 41,100 crore Vs. 41,202 in YoY Vs. 31,620 Cr in QoQ therefore
slightly down in YoY and up by 30% in QoQ due to lockdown ease in part
of the country.
Revenue for the H1FY21 was around INR 72,720 Cr Vs. 79,398 Cr in H1FY20 therefore declined by 8.4% in YoY.
EBITDA
for the quarter was INR 2,006 crore Vs. 2,322 Cr in YoY Vs. 1,079 Cr in
QoQ therefore declined by 15.7% in YoY and up by 85.9% in QoQ. EBITDA
margin was around 5.5% Vs. 5.8% in YoY Vs. 3.8% in QoQ.
H1FY21 EBITDA was around INR 3,092 Cr Vs. 4,390 Cr in H1FY20 therefore declined by 29.7% in YoY.
The
current footprint of the business spans across 11,931 retail stores in
over 7,000 towns with 29.7 million sq. ft. of retail space. Entered
pharma category during the quarter.
JioMart Kirana
partnerships were extended to 20 cities during the period with 4X
increase in orders over 1Q FY21. With a strong value proposition and
uninterrupted service despite operating constraints, JioMart continues
to win the trust of Kirana partners
Petrochemicals business
Revenue
of Q2FY21 was INR 29,665 Cr Vs. 38,538 Cr in YoY Vs. 25,192 Cr in QoQ
therefore declined by 23% in YoY and up by 17.8% in QoQ.
Revenue for H1FY21 was around INR 54,857 Cr Vs. 76,149 Cr in H1FY20 therefore declined by 28% in YoY.
EBITDA
of Q2FY21 was around INR 5,964 Cr Vs. 8,946 Cr in Q2FY20 Vs. 4,430 Cr
in Q1FY21 therefore declined by 33.4% in YoY and up by 34.6% in QoQ.
EBITDA margin was around 20.1% Vs. 23.2% in YoY Vs. 20.1% in QoQ.
Cracking
margins for Reliance improved Q-o-Q due to feedstock mix and favourable
economics for ethane cracking. RIL crackers operated at near 100%
utilisations during the quarter
PP margins reduced by 21% ($
126/MT) due to higher feedstock prices despite robust demand from health
& hygiene applications. PE margins remained stable ($ 478/MT) with
firm demand from packaging sector. PVC margins improved by 14% ($546/MT)
led by strong demand recovery in agri and construction sector.
PX-Naphtha
delta declined 37% Q-o-Q ($ 136/MT) with sharp increase in naphtha
price while PTA margins declined by 14% Q-o-Q ($107/MT) in well-supplied
markets. PX and PTA markets were also impacted by start-up of new
capacities in China.
Refining & Marketing business
Revenue
of Q2FY21 was INR 62,154 Cr Vs. 97,229 Cr in Q2FY20 Vs. 46,642 Cr in
Q1FY21 therefore declined by 36% in YoY and up by 34.7% in QoQ.
EBITDA
in Q2FY21 was around INR 3,002 Cr Vs. 5,896 Cr in YoY Vs. 3,818 Cr in
QoQ therefore declined by 49.1% in YoY and 21.4% in QoQ
EBITDA
margin was 4.8% Vs. 8.2% in YoY therefore declined by 340 bps in QoQ .
Production (MMT) 15.3 Vs. 16.7 in YoY Vs. 16.6 in QoQ.
GRM
($/bbl) was around 5.7 in Q2FY21 Vs. 9.4 in Q2FY20 Vs. 6.3 in Q1FY21.
Therefore significantly declined in YoY and also corrected in QoQ.
Segment
EBITDA for 2Q FY21 declined by 21.4% QoQ to INR 3,002 crore primarily
on account of lower middle distillates cracks and narrower light-heavy
crude differential leading to higher crude cost. The performance was
also partially affected by planned turnaround during the quarter.
Reliance
BP Mobility Limited (“RBML”), a joint venture (JV) of RIL and BP
operated 1,406 fuel retail outlets. Against industry growth of 5.3% and
41.1% Q-o-Q in HSD and MS, RBML clocked 15.1% and 55.4% respectively.
Media Business
Revenue
for Q2FY21 was around INR 1,061 Cr Vs. 1,174 Cr in Q2FY20 Vs. 807 Cr in
Q1FY21 therefore declined by 9.6% in YoY and up by 31.5% in QoQ.
EBITDA
in Q2FY21 was around INR 166 Cr Vs. 68 Cr in YoY Vs. 27 Cr in QoQ.
Therefore significantly improved in QoQ. EBITDA margin in Q2FY21 was
around 15.6% Vs. 3.3% in QoQ.
TV viewership has now settled at
~1.1x pre-COVID levels. Pay-TV has clawed back its share from
free-to-air channels, as entertainment programming is back in
full-swing.
An increased propensity to pay for content has
been witnessed. Flagship properties MoneyControl and Voot have witnessed
rapid growth in subscribers
Financial
ROE and ROCE is
around 10.3% and 10.7% respectively and book value per share is around
INR 970 per share and share is currently trading at 2.5x of its book
value. Company is currently trading at annualized PE of 36 around which
is average as per Industry benchmark. Promoter holding in the company is
around 50.5% which is slightly increased by YoY and QoQ. Insurance cos,
FIIs and mutual fund hold around 25.2%, 5.1% and 5.9% respectively.
**Operating cash flow as of Sep 2020 was INR (12,305 Cr) Vs. 53,482 Cr
in Sep 2019**
View Share price high 2,368 and now 2,055 .
Reliance Industries Limited (RIL) is an Indian multinational
conglomerate company. Reliance owns businesses across India engaged in
energy, petrochemicals, textiles, natural resources, retail, and
telecommunications.
Position: Strong support is INR 2000/1950.
Long term investor should continue with the company with target price of
INR 3000 any correction will give good opportunity to enter Reliance on
SIP basis.
Opportunities Reliance Industries is currently
no.1 company In India in terms of market capitalization and outperform
for past 3 years. Reliance is diversified group now and its more focused
now on Retail and digital services (JIO) and partially setoff the
pressure and margin of Refining and Petrochemical business. The current
growth of Retail and Digital services business is excellent and Reliance
has overtaken to Airtel and Vodafone Idea as now No.1 Telecom Company
in India on subscription base as well as revenue base also. As 5G is
under process and more looking into digital media space the growth is
evitable. Petroleum & refining company currently technology driven
company with highly diversified their business model.
Reliance
JIO Jio has become the only operator (outside China) to have reached
the milestone of 400 million subscribers in a single country market.
Wireless gross addition showed a strong sequential increase to 27.2
million as lockdown restrictions began to ease during the quarter. Jio
Platforms expanded efforts to develop open and interoperable interface
compliant architecture based 5G solution with a virtualized RAN. Very
aggressive player to increase their customer base on MoM (Net customer
addition of 7.3 Mn in this quarter), every quarter exceptionally well
growth for topline as well as bottom line, Quarterly EBITDA run rate
crossed $1 billion. Sequential improvement in ARPU at INR 145 vs. INR
140 in 1Q FY21. Qualcomm Technologies and Jio achieved over a 1 Gbps
milestone on the Reliance Jio 5GNR solution with a Tier-I carrier in the
US. JPL has completed the fund raising of INR 152K crores across
thirteen global investors which includes Facebook, Google etc.
Reliance
Retail Strong recovery in revenues with EBITDA almost doubling
sequentially as compare with Q1 however still not pre Covid level. Store
functioning continued to be impacted, but progressively eased during
quarter, 85% stores operational (1Q: 50%), of which half could operate
fully. 232 new stores launched in quarter as operating curbs are lifted,
total stores currently are 11,932. Gross revenue is more than 41K Cr in
this quarter and EBITDA was around 2K Cr. Digital commerce continues to
grow customers and scale Led by JioMart, AJIO and RelianceDigital.
Kirana partnerships extended to 20 cities; orders up 4X while providing
uninterrupted supplies. Various acquisition eg. Future group (subject to
regulatory approval), Netmeds, Grab, C-square etc. to largest player in
the retail sector. Largest fund raise in India in consumer / retail
sector from marquee global investors around 37.7K Cr
More Value will be more unlocked for shareholders once Reliance comes with IPO of Reliance Digital and Reliance Retail
Risk : Reliance two main businesses Petrochemicals and Refining continuously
declined in YoY and QoQ despite they were covered still covered 56%
dependent on topline in this quarter. GRM ($/bbl) corrected in QoQ and
YoY. In bottom line this segment covers around 57% and declined by more
than 40% in YoY. Deal with Aramco is also put on hold and currently no
clarity on this matter.
Sources:
Various publications
Disclaimer: The information provided herein is based on publicly available information and other sources believed to be reliable, but involve uncertainties that could cause actual events to differ materially from those expressed or implied in such statements. The document is given for general and information purpose and is neither an investment advice nor an offer to sell nor a solicitation. While due care has been exercised while preparing this document, we do not warrant the completeness or accuracy of the information. We will not accept any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.
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