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Recommendations India

Reliance Industries 4QFY2014 performance highlights and results update

April 21, 2014, Monday, 16:10 GMT | 11:10 EST | 19:40 IST | 22:10 SGT
Contributed by Angel Broking

Reliance Industries’ (RIL) 4QFY2014 net profit was in line with our estimates. Its core profitability was better than expected while other income was slightly below our estimates. We recommend an Accumulate rating on the stock.

Refining and Petrochemicals segments boost top-line: RIL’s 4QFY2014 net sales increased by 13.1% yoy to Rs.95,193cr (below our estimate of Rs.100,726cr). The increase in net sales was mainly led by higher Refining segment sales (+12.5% yoy to Rs.87,624) and Petrochemicals segment sales (+9.9% yoy to Rs.24,343cr). RIL’s KG-D6 gas production fell to 13.6mmscmd compared to 19mmscmd in 4QFY2013; however, it improved on a qoq basis.

EBITDA rises 4.8% yoy: RIL’s EBITDA rose by 4.8% yoy to Rs.8,199cr, on account of higher profits from the Refining and Petrochemicals segments. The Refining segment’s EBIT increased by 12.3% yoy to Rs.3,954cr due to higher GRMs. RIL’s GRM stood at US$9.3/bbl in 4QFY2014 compared to US$10.1/bbl in 4QFY2013.

Lower other income and higher taxes mutes PAT growth: During the quarter, the other income decreased by 9.2% yoy to Rs.2,036cr and the tax rate increased to 22.8% compared to 21.5% in 4QFY2013. Hence, the company’s PAT was flat yoy at Rs.5,631cr (in line with our estimate of Rs.5,703cr).

Outlook and valuation: For 4QFY2014, RIL’s Petrochemicals and Refining segments’ profit reported improvement; however, its Oil & Gas segment’s profitability continued to decline on a yoy basis due to decline in production from its KG D6 block. Looking ahead, we expect production from the KG D6 block to increase gradually from FY2015. Moreover, higher gas prices and the recent improvement in GRMs are likely to drive earnings growth in FY2015-16. Hence, we recommend an Accumulate rating on the stock.