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Reliance Industries 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, Reliance Industries (RIL) reported a better-than-expected net profit mainly due to higher-than-expected profit from the Refining segment. We maintain our Neutral view on the stock.

Petchem and Refining segment drives top-line growth: RIL’s 3QFY2013 net sales increased by 10.3% yoy to Rs.93,886cr, above our estimate of Rs.89,981cr. Net sales growth was mainly driven by the Petrochemicals segment (+11.5% yoy to Rs.22,053cr) and Refining segment (+12.9% yoy to Rs.86,641cr). However, RIL’s KG-D6 gas production fell to 24mmscmd (-41.4% yoy).

GRMs above expectations: RIL’s EBITDA increased by 14.9% yoy to Rs.8,373cr on account of higher profits from the Refining segment. The Refining segment’s EBIT grew by 114.5% yoy to Rs.3,615cr. RIL’s GRM stood at US$9.6/bbl in 3QFY2013 compared to US$6.8/bbl in 3QFY2012.

Lower tax rate boosts bottom-line growth further: During the quarter, the depreciation (including depletion) expense decreased by 4.4% yoy to Rs.2,457cr due to lower oil and gas production. Tax rate stood at 19.7% in 3QFY2013 compared to 22.6% in 3QFY2012. Hence, the company’s PAT increased by 23.9% yoy to Rs.5,502cr (above our estimate of Rs.5,108cr).

Outlook and valuation: RIL’s Refining segment profit increased, while its Petrochemicals and Oil & Gas segments’ profitability declined during 3QFY2013. Looking ahead, concerns of declining gas production from KG D6 block remain. RIL has stated that additional investments are required to increase production from KG D6. However, production is unlikely to increase during FY2013-14 in our view. We maintain our Neutral view on the stock.