as of (October 18, 2019) by Retail, Jio beat · Reliance Industries’ (RIL) Q2FY20 consolidatedEBITDA grew5% yoyand 4% qoq to Rs221.5bn, in line with our estimate. PAT rose 19% yoy

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Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore SA: SUNIL TIRUMALAI

India Equity Research | Oil & Gas

October 20, 2019

Result Update

Reliance Industries Refer to important disclosures at the end of this report

In-line earnings; refining miss offset by Retail, Jio beat

CMP Target Price

Rs 1,416 Rs 1,540 (▲) as of (October 18, 2019) 12 months

Rating Upside

HOLD (■) 8.7 %

Change in Estimates

EPS Chg FY20E/FY21E (%) 5.4/4.8

Target Price change (%) 9.2

Target Period (Months) 12

Previous Reco HOLD

Emkay vs Consensus

EPS Estimates

FY20E FY21E

Emkay 75.5 96.8

Consensus 77.0 94.4

Mean Consensus TP (12M) Rs 1,454

Stock Details

Bloomberg Code RIL IN

Face Value (Rs) 10

Shares outstanding (mn) 6,339

52 Week H/L 1,428 / 1,016

M Cap (Rs bn/USD bn) 8,978 / 126.21

Daily Avg Volume (nos.) 1,02,56,700

Daily Avg Turnover (US$ mn) 180.1

Shareholding Pattern Jun '19

Promoters 46.2%

FIIs 23.8%

DIIs 11.4%

Public and Others 18.6%

Price Performance

(%) 1M 3M 6M 12M

Absolute 17 12 2 23

Rel. to Nifty 9 12 3 10

Reliance Industries’ (RIL) Q2FY20 consolidated EBITDA grew 5% yoy and 4% qoq to

Rs221.5bn, in line with our estimate. PAT rose 19% yoy and12% qoq to Rs113.5bn but

was a 4% miss as the new lower tax rate is yet to be implemented in Jio and Retail.

Although refining earnings were lower on reduced throughput and higher opex due to

shutdown, Jio and Retail numbers were a beat on strong subscriber additions and margins,

respectively. Petchem was largely in line as volumes grew 14% qoq due to Q1 shutdown.

Jio reported Rs51.7bn in EBITDA, which was up 10% qoq due to 23.9mn subscriber

additions and a 169bps qoq EBITDA margin expansion. ARPU fell 2% qoq to Rs120. Retail

revenues/EBITDA grew 8%/13% qoq to Rs412bn/23.2bn with a 27bps margin increase.

We raise FY20/21E EPS by 5% each building in higher Retail earnings and other income.

We value RIL on EV/EBITDA SOTP and rollover our valuation to September 2021. We

increase our TP by 9% to Rs1,540. Maintain Hold rating but remain OW in sector EAP.

Relative price chart

Source: Bloomberg This report is solely produced by Emkay Global. The following person(s) are responsible for the production of the recommendation:

Sabri Hazarika

[email protected]

+91 22 6612 1282

Naval Seth

[email protected]

+91 22 6624 2414

Ashit Desai

[email protected]

+91 22 6612 1340

Sunil Tirumalai

[email protected]

+91 22 6624 2435

-10

-4

2

8

14

20

1000

1085

1170

1255

1340

1425

Oct-18Dec-18Feb-19Apr-19 Jun-19Aug-19Oct-19

%Rs

Reliance Industries (LHS) Rel to Nifty (RHS)

In-line GRM at USD9.4/bbl; consol. capex of Rs191bn: RIL reported USD9.4/bbl in GRM

vs. USD8.1 in Q1, while throughput fell 5% qoq to 16.7mmt due to shutdown in June-July

2019. Opex grew 22% to USD2.7/bbl. EBITDA rose by 10% qoq to Rs56.6bn. Petchem

standalone EBITDA/mt fell 12% qoq to USD245 due to weak deltas on many products.

Upstream earnings remained weak due to production decline and weak realization. Core

Retail EBITDA margin was 8.8%, with 86% contribution to overall EBITDA. In Jio, network

opex/license fees increased 8%/7% qoq to Rs41.2bn/Rs13.7bn, but access charges fell 23%

qoq to Rs6.6bn. Consolidated capex for Q2 was Rs191bn, of which O2C/Upstream/Retail/Jio

was Rs50bn/20bn/20bn/50bn. Gross debt stood at Rs2.92trn, of which

standalone/Jio/Shale/Retail were Rs1.46trn/840bn/350bn/157bn. Supplier’s credit remained

unchanged at Rs580bn qoq. Implied net debt was largely flat qoq at Rs2.15trn.

Management guidance: Refining outlook is mixed as 1.0/1.2mb/d of demand growth in

CY19/20 would be met by 1.6/1.0mb/d of capacity addition, but the upcoming IMO should

support distillate cracks with diesel forwards currently at USD20/bbl. The petcoke gasifiers

are expected to be commercialized by the end of FY20. Petchem outlook is volatile amid

global demand concerns and new capacities but Indian scenario is healthy. Retail momentum

would be supported by operating leverage and expansion to Tier-III/IV cities. The ‘New

Commerce’ initiative will be announced soon. In telecom, the target of 50% RMS and 50%

EBITDA margin is maintained. Mobility and wireline investment cycles are over with 99%

population coverage. In FTTH, it maintains the target of 20mn homes by 12-15 months. The

Tower-Invit deal with Brookfield is expected to close soon, while fiber is under discussions.

Capex intensity would reduce and the de-leveraging roadmap is unconditional. RIL will decide

on moving to the new tax regime by year end.

Outlook and valuation: We raise our refining EV/EBITDA multiple valuing O2C at USD70bn

EV (vs. USD75bn for Aramco deal). We also reduce FY20/21E Jio capex to Rs300bn/250bn

vs. Rs400bn/350bn earlier, though our overall capex and debt levels are largely same. Key

risks are adverse commodity margins/currency, competition and cost-capex overruns.

Please see our sector model portfolio (Emkay Alpha Portfolio): Oil & Gas (page 16)

Financial Snapshot (Consolidated)

(Rs mn) FY18 FY19 FY20E FY21E FY22E

Revenue 39,16,770 56,71,350 61,47,493 66,52,437 71,34,261

EBITDA 6,41,760 8,39,180 9,40,755 11,62,828 12,65,279

EBITDA Margin (%) 16.4 14.8 15.3 17.5 17.7

APAT 3,52,869 3,94,809 4,47,795 5,75,406 6,21,653

EPS (Rs) 59.6 66.6 75.5 96.8 104.4

EPS (% chg) (40.9) 11.8 13.3 28.3 7.9

ROE (%) 12.7 11.6 11.0 12.8 12.4

P/E (x) 23.8 21.3 18.8 14.6 13.6

EV/EBITDA (x) 15.5 12.5 11.4 9.2 8.2

P/BV (x) 2.9 2.2 2.0 1.8 1.6

Source: Company, Emkay Research

Reliance Industries (RIL IN) India Equity Research | Result Update

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

SA: SUNIL TIRUMALAI October 20, 2019 | 2

Exhibit 1: Actual vs. Estimates (Q2FY20)

Rs bn (Consol) Actual Estimate (Emkay)

Consensus Estimate

(Bloomberg)

Variation Comment

Emkay Consensus

Total Revenue 1,485.3 1,638.9 1,524.5 -9% -3%

EBITDA 221.5 224.4 224.7 -1% -1%

EBITDA Margin (%) 15% 14% 15% 122bps 18bps

Adjusted Net Profit 113.5 117.7 111.3 -4% 2% Due to higher taxes


Exhibit 2: Quarterly Highlights (Consolidated)

Rs.bn Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 YoY QoQ 1HFY19 1HFY20 YoY

Revenue 1,433 1,564 1,387 1,570 1,485 4% -5% 2,721 3,055 12%

Expenditure 1,222 1,351 1,178 1,357 1,264 3% -7% 2,303 2,620 14%

EBITDA 211 213 208 213 222 5% 4% 418 435 4%

Depreciation 52 52 53 50 53 2% 6% 104 103 -1%

Interest 39 41 49 51 55 39% 7% 75 106 41%

Other Income 13 25 27 31 36 189% 15% 30 68 123%

Exceptionals 0 0 5 0 0 0 0

PBT 132 144 138 143 150 14% 5% 269 293 9%

Tax 36 41 34 42 37 1% -12% 79 79 0%

PAT 95 104 104 101 113 18% 12% 190 214 13%

Minor./Assc. 0 0 1 0 1 0 1

Group Rep. PAT 95 104 104 101 114 19% 12% 190 215 13%

OCI -21 7 618 -1 -8 -37 -9

Total CI 75 111 722 101 106 42% 5% 154 206 34%

Group Adj. PAT 95 104 101 101 114 19% 12% 190 215 13%

Adj.EPS (Rs) 16.1 17.5 17.0 17.1 19.2 19% 12% 32.1 36.3 13%

EBITDA Margin 15% 14% 15% 14% 15% 15% 14%

Tax Rate 28% 28% 25% 29% 25% 29% 27%

Segmental EBIT 145 150 137 140 147 1% 5% 287 287 0%

Petrochemicals 81 82 80 75 76 -6% 1% 160 151 -5%

Refining 53 51 42 45 50 -7% 10% 106 95 -11%

Upstream Oil & Gas -5 -2 -3 -2 -3 -9 -6

US Shale -3 -3 -4 -4 -3 -5 -7

Organised Retail 12 15 17 18 20 64% 15% 23 38 65%

Telecom/Jio 20 24 27 31 33 63% 8% 38 64 70%

Others 3 4 1 5 4 27% -17% 7 9 24%

Shale Production (mmscmd) 6.5 6.4 5.9 5.5 6.1 -6% 11% 7.0 5.8 -16%

Gross Debt* 2,587 2,744 2,875 2,882 2,920 13% 1% 2,587 2,920 13%

Cash & Equivalent* 767 779 1,330 1,317 1,347 76% 2% 767 1,347 76%

Net Debt* 1,820 1,964 1,545 1,565 1,572 -14% 0% 1,820 1,572 -14%

Net Debt+Supp. Cr. 2,640 2,784 2,125 2,145 2,152 -18% 0% 2,640 2,152 -18%


*Note: Adjusted PAT may not match with annual tables fully due to different adjustment method in Emkay detailed annual model




Exhibit 3: Quarterly Highlights (Standalone)

Rs.bn Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 YoY QoQ 1HFY19 1HFY20 YoY

Revenue 962 1,001 836 883 871 -9% -1% 1,873 1,754 -6%

Expenditure 813 856 699 746 735 -10% -2% 1,573 1,481 -6%

EBITDA 149 145 137 136 137 -8% 0% 300 273 -9%

Depreciation 27 26 25 22 23 -16% 7% 55 45 -18%

Interest 24 24 28 27 27 13% 1% 46 54 19%

Other Income 20 25 29 33 36 80% 8% 41 70 71%

Exceptionals 0 0 0 0 0 0 0

PBT 117 120 113 121 123 4% 1% 241 244 1%

Tax 29 30 28 31 26 -11% -17% 64 56 -12%

PAT 89 89 86 90 97 10% 7% 177 187 6%

OCI -13 14 610 -1 -9 -28 -10

Total CI 76 103 696 89 88 16% -1% 149 177 19%

Adj PAT 89 89 86 90 97 10% 7% 177 187 6%

Adj. EPS (Rs) 14.9 15.1 14.4 15.2 16.4 10% 7% 29.8 31.6 6%

EBITDA Margin 15% 14% 16% 15% 16% 16% 16%

Tax Rate 25% 25% 24% 25% 21% 27% 23%

Segmental EBIT 130 131 120 120 125 -3% 4% 257 245 -5%

Refining 52 49 40 44 49 -5% 11% 104 93 -10%

Petrochemicals 80 80 78 74 75 -6% 1% 157 149 -5%

Upstream Oil & Gas -2 1 1 1 1 -4 2

Others 0 0 0 0 0 267% -55% 0 1 61%

GRM ($/bbl) 9.5 8.8 8.2 8.1 9.4 -1% 16% 10.0 8.8 -13%

Opex ($/bbl) 2.8 2.6 2.2 2.2 2.7 -1% 22% 2.8 2.5 -12%

Refining Vol. (mmt) 17.7 18.0 16.0 17.5 16.7 -6% -5% 34.3 34.2 0%

Petchem Prod. (mmt) 4.9 5.0 4.9 4.4 5.1 4% 14% 9.6 9.5 -1%

Petchem EBIT/mt ($) 232 220 226 239 210 -10% -12% 240 224 -7%

KG-D6 Gas Prod. (mmscmd) 3.5 1.9 1.8 1.8 1.7 -52% -5% 3.8 1.7 -55%

PMT Gas Prod. (mmscmd) 3.4 4.1 4.0 3.5 3.6 5% 3% 3.9 3.5 -8%

Long+Short Term Debt B/S 1,132 1,577 1,230 1,132 1,230 9%

Cash & Equivalent 22 38 44 22 44 99%

Loans & Advances 251 367 298 251 298 19%

Current Liabilities 1,842 1,621 1,763 1,842 1,763 -4%


Exhibit 4: Revised Estimates

Rs bn FY20E FY21E

Consol Previous Revised Variance Previous Revised Variance

Revenue 6,098 6,147 1% 6,583 6,652 1%

EBITDA 928 941 1% 1,150 1,163 1%

EBITDA Margins 15% 15% 0bps 17% 17% 0bps

PAT 425 448 5% 549 575 5%

EPS (Rs.) 71.6 75.5 5% 92.4 96.8 5%





Result analysis, analyst meet takeaways and outlook-assumptions

Q2FY20 results

RIL’s Q2 consolidated EBITDA increased 5% yoy and 4% qoq to Rs221.5bn but came largely

inline with our estimate. Depreciation-interest rose 6-7% qoq but other income was also higher

by 15%. The tax rate was at 25% vs. 29% in Q1 as RIL booked MAT reduction (18.5% to 15%)

in standalone P&L (ETR of 21%), whereas it was at 33-35% for Retail and Jio. It will decide on

moving to the new regime by the end of year. Reported PAT of Rs113.5bn grew 19% yoy and

12% qoq but was a 4% miss to our estimate due to the tax difference (we assumed 21%).

Broadly, results were in line, with refining earnings miss offset by Retail and Jio beat.

Refining

GRM for Q2 was largely in line at USD9.4/bbl, compared with USD8.1/bbl in Q1, with pressure

from higher FO cracks, tight crude market (heavy crude availability) and shutdown. Refinery

throughput fell 5% qoq to 16.7mmt due to shutdown in June-July 2019. Unit opex also grew 22%

qoq to USD2.7/bbl, resulting in an EBITDA miss of 8%.

Refined product cracks were up in Q2 due to IMO and outages for middle distillates; seasonality,

PES outage, Saudi run cut for gasoline; the Middle East power demand and IMO resulted in

shortage for FO. COSCO sanction drove a jump in shipping rates but expect them to cool off.

Management indicated that refining outlook would be affected by 1.6/1.0mb/d capacity addition

expected in CY19/20 vs. 0.85-1.0/1.2 mb/d demand growth, coupled with reduced crude supplies

(sanctions, OPEC cuts – especially heavy); yet, the upcoming IMO and transportation fuel

demand are positives. The IMO impact took longer to show in diesel-FO cracks, which may be

due to stocking, but expect it to increase going forward. Diesel crack forwards are currently at

USD20/bbl, with IMO leading to 1.5mb/d of extra diesel demand. RIL is ready for it. In Q2, RIL’s

DTA coker was shut for revamp, which resulted in throughput reduction. Another turnaround is

set to happen in Q4.

Exhibit 5: Refining business outlook-assumptions

Consol. (USD/bbl) FY18 FY19 FY20E FY21E FY22E

GRM 11.6 9.2 10.0 12.0 12.1

Throughput (mmt) 69.8 68.3 70.0 70.5 71.0

EBITDA (Rs mn) 279,030 230,380 252,577 313,001 313,817


Management expects to commercialize and expense/capitalize petcoke gasification project by

Q4. Economics are favorable. BP JV to sign a definitive agreement in 3-4 months and in six

months, it would be ready. About 4,000 new outlets by JV in 4-5 years as planning is done and

in the stages of acquiring prospects. Have discussed USD75bn O2C EV with Aramco but

customary due diligence currently on. Expect the deal to be done in six months but can get

extended to nine months. Payments could be staggered. RIL is not looking to buy BPCL stake

as of now.

We keep our FY20/21 earnings estimates unchanged for refining, though have raised

EV/EBITDA valuation multiple from 6.1x to 6.6x to value the O2C business as a whole at

USD70bn vs. USD75bn indicated for the Saudi Aramco deal.




Petrochemcials

Petchem volumes were up 14% qoq to 5.1mmt as Q1 had a major PX plant shutdown.

Standalone EBITDA/mt, however, fell 12% to USD245, with deltas down on all major products

(PP fell the highest by 44% qoq), except for PVC, POY and MEG. Upstream O&G earnings

weakened on lower production and realizations.

Petchem deltas were affected by higher feedstock costs, new capacities, global slowdowns,

trade war concerns etc. PVC was impacted by excessive rains.

Exhibit 6: Petchem business outlook-assumptions

Consol. FY18 FY19 FY20E FY21E FY22E

Volumes (mmt) 18.7 21.1 21.4 21.7 21.7

EBITDA/mt (Rs) 214.1 254.9 238.4 241.8 244.8

EBITDA (Rs mn) 258,600 376,450 354,588 361,859 363,665


Petchem outlook is volatile in the wake of global concerns and new capacities but Indian scenario

is better. Polyester should see better demand from the festive season and upcoming New Year.

The trade war has some beneficial impact also as it opens market between the US and China.

Single-use plastic is just 1% of RIL’s portfolio

We keep our FY20/21 earnings estimates and valuation unchanged for petchem.

Upstream Oil & Gas

Upstream projects are on schedule and FY21 average gas production from KG could be 4-

5mmscmd and it will ramp up. Expect to get USD7-7.5/mmbtu price.

Exhibit 7: Upstream business outlook-assumptions

Consol. FY18 FY19 FY20E FY21E FY22E

Gas Output (mmscmd) 14.7 10.7 9.3 9.7 17.3

EBITDA (Rs mn) 16,670 16,420 8,293 17,600 48,259


We keep our FY20/21E earnings and valuation unchanged for upstream, though rollover

to September 2021 has resulted in some valuation increase.

Capex, debt and CWIP

Consolidated capex for Q2 was Rs191bn, of which O2C/Upstream/Retail/Jio was

Rs50bn/20bn/20bn/50bn. Gross consolidated debt was Rs2.92trn, of which

standalone/Jio/Shale/Retail was Rs1,460bn/840bn/350bn/157bn. Supplier’s credit remained

unchanged qoq at Rs580bn with Rs440bn with Jio. Standalone cash was Rs1.18trn and interest

capitalized was Rs10.8bn. There was a forex loss of ~Rs7bn. Against Rs1.05trn standalone

CWIP at FY19 end, RIL expensed Rs250bn in H1, while Rs50bn was capex. Hence, Q2 CWIP

was Rs850bn, of which Rs500bn was gasifiers and Rs350bn was real-estate, upstream etc.

O2C capex included DTA coker revamp (30% capacity growth for IMO, 15% done till now), FCCU

debottlenecking, sulfur process augmenting, naphtha upgrade-DTA platformer debottlenecking,

marine tank farm augmentation (incl. pipes), water treatment and desalination revamp (20-year

old units) and fuel & loss optimization and security overhaul.

Capex intensity will reduce and management suggested that total capex and Jio capex will fall

with Q2 numbers as a reference point. The chairman’s deleveraging roadmap is unconditional

and capex reduction is an important part of FCF generation and debt reduction.




Reliance Jio – Q2FY20 Result Update

Financial performance

The momentum of net subscriber additions continued with ~24.0mn additions. Sequential

revenue growth was limited by a 2% qoq ARPU decline, whereas EBITDA was aided by

lower access charges (27% below estimates and down 23% qoq). EBITDA margins

improved to 41.8% (+169bps qoq). Investment cycle for JIO is at near completion with 99%

population coverage.

Revenue growth of 6% qoq and 34% yoy to Rs123.6bn vs. Rs116.8bn in Q1. Reported

EBITDA at Rs51.6bn was up 10.5% qoq with EBITDA margins of 41.8% (+169bps qoq).

Network opex/license fees were up 8%/7% qoq to Rs41.2bn/Rs13.7bn. Selling &

distribution was up 1% qoq to Rs6.9bn. Employee charges stood at Rs3.7bn, down 6%

qoq. Surprisingly, access charges fell 23% qoq to 6.6bn, possibly on account of a higher

mix of on-net traffic and ongoing ring-time related tussle with incumbent operators. MoU

fell on a qoq basis to 789mins from 821mins in Q1.

RPAT stood at Rs9.9bn, up 11% qoq, marginally below estimate due to higher depreciation

and finance charges. Tax rate was at 34.9%, flat qoq.

Depreciation increased by 7% qoq to Rs17.7bn. Interest expenses rose by 13% qoq to

Rs18.7bn.

KPI’s

ARPU was down by 1.6% qoq to Rs120 vs. our est. of Rs122.

Subscriber base increased to Rs355.3mn from Rs331.3mn in Q1. Gross subscriber

additions were 31.6mn for the quarter, with Net adds coming in at 24mn vs. 24.5mn in Q1.

Voice and data volumes registered 3% and 10% qoq growth, respectively. Data

consumption/Sub remained steady at 11.7GB vs. 11.4Gb in Q1FY20, while MOU fell to

789mins from 821mins in Q1.

Churn was at 3.0% vs. 2.9% last quarter.

Exhibit 8: Jio KPIs

Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 KPI- Q2FY20 JIO Bharti Airtel (India) VIL

ARPU (Rs) 132 130 126 122 120 ARPU (Rs) 120 126 106

Data Traffic (mn GB) 7710 8640 9560 10900 12020 Data Traffic (mn GB) 12020 4,602 3,270

Total Voice Traffic/day (mn) 5338 6340 7241 7860 8126 Total Voice Traffic/day (mn) 8,126 8,032 6,977

Subscriber base 252 280 307 331 355 Subscriber base 355 290 312

Net add 37.0 27.8 26.7 24.5 24.0 Net add 24 6 -8.0

Data Usage/ Subs (GB) 11.0 10.8 10.9 11.4 11.7 Data Usage/ Subs (GB) 11.7 12.4 7.5

Data Usage/ Subs (GB)- JIO Phone 8-9 MOU per Subscriber per month (mn) 789 844 662

MOU per Subscriber per month (mn) 761 794 823 821 789

Source: Company, Emkay Research | *Bharti and Idea KPI are estimates




Exhibit 9: Quarterly financials

Rs mn Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Qoq (%) YoY (%)

Net Sales 92,400 1,03,830 1,11,060 1,16,790 1,23,540 5.8 33.7

Access charge 10,460 10,050 10,990 8,510 6,550 (23.0) (37.4)

as % of sales 11.3 9.7 9.9 7.3 5.3

Network Operating 26,040 31,900 34,010 38,240 41,230 7.8 58.3

as % of sales 28.2 30.7 30.6 32.7 33.4

Employee Expenses 4,060 4,260 4,580 3,920 3,700 (5.6) (8.9)

as % of sales 4.4 4.1 4.1 3.4 3.0

Marketing Expenses 6,290 5,740 6,420 6,550 6,930 5.8 10.2

as % of sales 6.8 5.5 5.8 5.6 5.6

License Fee 9,830 11,360 11,800 12,870 13,740 6.8 39.8

as % of sales 10.6 10.9 10.6 11.0 11.1

Total operating expenditure 56,680 63,310 67,800 70,090 72,150 2.9 27.3

EBITDA 35,720 40,520 43,260 46,700 51,390 10.0 43.9

Depreciation 15,310 16,840 17,440 16,570 17,750 7.1 15.9

EBIT 20,410 23,680 25,820 30,130 33,640 11.6 64.8

Other Income 10 10 30 160 270

Interest 9,960 10,910 12,940 16,600 18,710 12.7 87.9

PBT 10,460 12,780 12,910 13,690 15,200 11.0 45.3

Tax 3,650 4,470 4,510 4,780 5,300 10.9 45.2

PAT 6,810 8,310 8,400 8,910 9,900 11.1 45.4

Margins (%) (bps) (bps)

EBIDTA 39.0 39.0 39.0 40.0 41.6 161 294

EBIT 22.8 22.8 23.2 25.8 27.2 143 514

EBT 12.3 12.3 11.6 11.7 12.3 58 98

PAT 8.0 8.0 7.6 7.6 8.0 38 64

Effective Tax rate 35.0 35.0 34.9 34.9 34.9 (5) (3)


Analyst meet takeaways

The peak investment cycle is behind for both mobility and wireline businesses. Capex spends in

H1 stood at Rs135bn, including fiber cost capitalization.

Exhibit 10: Capex


140120

250

80

210

70 75

130

170 160140

215

85

50

0

50

100

150

200

250

300

Q1F

Y17

Q2F

Y17

Q3F

Y17

Q4F

Y17

Q1F

Y18

Q2F

Y18

Q3F

Y18

Q4F

Y18

Q1F

Y19

Q2F

Y19

Q3F

Y19

Q4F

Y19

Q1F

Y20

Q2F

Y20

Rs b

n

Excl tower & fibre InvIts




JioPhone Diwali offer: Uptick has been good so far and currently, no decision on

extending this offer beyond the festive season.

IUC top vouchers: IUC cost-to-consumers is not the signal for tariff increase strategy. It

will remain if TRAI does not stick to their earlier recommendation of Zero IUC from January

2020. Management eluded to the reversal of top-up vouchers if JIO becomes a net receiver

of IUC going forward even if TRAI keeps 6 paise. There has been an impact on consumer

sentiment but management believes that customers are habituated to multiple recharges

in the past.

Proportions of digital recharges are increasing every quarter, which is limiting S&C cost

increase. S&D cost as % of revenues will keep coming down on a quarterly basis.

There is some revenue recognition from FTTH services in Q2. ARPU calculation includes

FTTH revenues. MoU decline can be attributed to seasonality.

Postpaid: Pushing in the market with a focus more on FTTH as it will aid postpaid additions

going forward. The focus is on both SMEs and large corporates.

FTTH services: The company is improving readiness with 1st day activation. Over the next

few weeks, customers will be on commercial plans. The target of 12-15 months to give

services to 20mn subscribers remains intact.

New tax regimes have not been adopted as yet to decide on it.

Brookfield is yet to take control of tower assets, after which, they will look for third-party

tenants. Tower additions in Q2 would have been 3000-4000.

Gross debt increased to Rs840bn from Rs750bn in the last quarter, while capex creditors

remained constant at Rs440bn.

Our estimates remain unchanged, although we have lowered capex assumption to

Rs300bn and Rs250bn for FY20 and FY21, respectively from Rs400bn and Rs350bn.

Reliance Retail – Q2FY20 Result Update

Performance highlights

Core retail continues to report steady performance despite slowdown: Retail revenues

grew by 27% to Rs412bn, which came in higher than our expectations. Compared with 48%

growth in Q1, growth has slowed due to consumer electronics and connectivity. This was on

expected lines due to higher comparables. Core retail (including grocery, electronics and fashion)

increased by 35%, driven by the strong pace of store additions and healthy LFL growth. LFL

growth for grocery and consumer electronics (CE) was healthy at 14% and 12%, respectively,

whereas fashion & lifestyle (F&L) recorded a slower LFL growth at 5%. Grocery grew by 50%,

consumer electronics (CE) by 28% and fashion & lifestyle (F&L) by 32%. Connectivity and petro

rose by 20% and 6%. Sequential growth was strong in grocery and CE; however, F&L recorded

a decline in qoq revenues for the second consecutive quarter. Expansion was stronger in this

quarter with 1.5mn sq. ft. being added, taking the retail space to 24.5mn sq. ft. in Q2. Overall,

337 stores were added with strong expansion in Tier-III/IV markets.

Stronger-than-expected improvement in core retail margins: Overall Retail EBITDA grew

67% to Rs23.2bn, with margins on net revenues expanding to 6.3%, up 150bps yoy/30bps qoq.

Core retail margin expansion was strong at 180bps to 8.8%, driven by healthy like-for-like growth,

operational efficiencies and a favorable product mix. Expansion in non-core retail margins (petro

+ connectivity) also appears to be higher at 2.2% during the quarter vs. 1.8%, which could be a

one-off as comparables are higher going ahead. SSS growth was in double digits.

Valuations and forecasts: With higher-than-expected core retail margins, we raise our margin

assumptions for FY20-21, increasing our FY21E EBITDA by 12%. Our forecast for the retail

division factor in 28% growth for FY20 and 19% for FY21, driven by core retail growth of 35%

and 23%, respectively, which factors in some growth moderation due to high comparables. We

value the retail division at 22.6x EV/EBITDA multiple (assuming the tax rate cut). Our revised EV

stands at Rs2891bn (Rs2323bn earlier) considering the increased margin assumption and rolling

forward to September 2021 estimates.




Exhibit 11: Retail forecasts

Rs mn FY18 FY19 FY20e YoY% FY21e YoY% FY22e YoY%

Revenue 691,980 1305660 1,673,245 28.2% 1,991,363 19.0% 2,346,179 17.8%

Net revenues 622,782 1,175,094 1,505,920 1,792,227 2,111,561

Core retail 362,598 732,236 991,284 35.4% 1,214,537 22.5% 1,461,012 20.3%

Core retail % of revenue 52.4% 56.1% 59.2% 61.0% 62.3%

Retail EBITDA 25,340 62,010 95,344 53.8% 116,107 21.8% 139,790 20.4%

Core retail EBITDA 19,580 46,131 78,819 70.9% 97,284 23.4% 118,342 21.6%

Retail margins (on net revenues) 4.1% 5.3% 6.3% 6.5% 6.6%

Core retail margin 6.0% 7.0% 8.8% 8.9% 9.0%


Exhibit 12: Revised estimates

FY20e FY21e

Old

estimates

New

estimates

YoY

%

Old

estimates

New

estimates

YoY

%

Revenue (net) 1,457,572 1,505,920 3.3% 1,726,738 1,792,227 3.8%

EBITDA 82,808 95,344 15.1% 103,636 116,107 12.0%

margin% 5.7% 6.3%

6.0% 6.5%

Core retail revenues 820,493 892,156 8.7% 1,001,067 1,093,083 9.2%

Core retail EBITDA 66,528 78,819 18.5% 85,091 97,284 14.3%

margin% 8.1% 8.8%

8.5% 8.9%


Valuation

Exhibit 13: SOTP-based valuation

Rs.bn (Sep'2021E, Consol) Method Head Multiple EV EV/sh

Refining EV/EBITDA 313 6.6 2,078 350

Petrochemicals EV/EBITDA 363 7.7 2,775 467

Upstream Oil & Gas DCF-EV/EBITDA 33 5.6 186 31

Organized Retail EV/EBITDA 128 22.6 2,891 487

Others EV/Sales 221 1.0 226 38

Telecom EV/EBITDA 372 8.7 3,227 543

Total 1,430 8.0 11,382 1,916

Adj. Net Debt (FY20E End) 2,238 377

Equity Value 9,145 1,540

Shares O/S (bn) 5.9


Exhibit 14: PE-based valuation

Rs./sh (Consol.) FY18 FY19 FY20E FY21E FY22E

RIL's Adjusted EPS 59.6 66.6 75.5 96.8 104.4

Target Multiple (x) 15.3

SOTP Target Price 1,540




SA: SUNIL TIRUMALAI October 20, 2019| 10

Exhibit 15: Detailed Quarterly metrics

Quarterly Metrics Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 YoY QoQ

Refining & Marketing

RIL's Average GRM ($/bbl) 12.0 11.6 11.0 10.5 9.5 8.8 8.2 8.1 9.4 -1% 16%

Singapore GRM ($/bbl) 8.3 7.2 7.0 6.0 6.1 4.3 3.2 3.5 6.5 7% 86%

OPEX/bbl ($) 3.2 3.1 2.6 2.9 2.8 2.6 2.2 2.2 2.7 -1% 22%

Petrol Cracks ($/bbl) 16.1 14.4 13.7 12.1 11.5 4.7 3.7 7.5 11.7 2% 56%

Diesel Cracks ($/bbl) 13.9 13.0 14.8 15.3 15.4 15.8 14.0 13.0 16.2 5% 25%

Jet Kero Cracks ($/bbl) 13.2 13.3 16.1 15.3 14.4 15.6 13.0 12.2 15.8 10% 30%

Naphtha Cracks ($/bbl) -0.2 3.0 -0.5 -1.4 -1.4 -6.4 -7.5 -9.1 -7.8 na/nm na/nm

FO Cracks ($/bbl) -2.5 -4.3 -6.3 -6.0 -4.2 -0.2 -0.9 -3.8 -0.5 na/nm na/nm

AL-AH Differential 1.5 2.3 2.9 3.2 2.3 2.2 1.4 1.8 1.5 -35% -17%

Refining Throughput (mmt) 18.1 17.7 16.7 16.6 17.7 18.0 16.0 17.5 16.7 -6% -5%

Domestic Sales incl. PSUs (mmt) 3.7 2.8 3.5 4.5 3.5 4.4 3.1 4.0 3.3 -6% -18%

Captive Consumption (mmt) 3.2 4.0 4.2 4.2 4.1 4.6 4.2 3.5 4.5 10% 29%

Exports (mmt) 11.2 10.3 10.7 9.3 10.1 10.8 9.1 10.1 10.8 7% 7%

Fuel Stations Operational 1,263 1,281 1,313 1,325 1,345 1,355 1,372 1,378 1,385 3% 1%

Consol Refining EBIT (Rs.bn) 66.2 61.7 56.1 53.2 53.2 50.6 41.8 45.1 49.6 -7% 10%

Petchem

Total Volumes (mmt) - India 7.9 8.4 9.2 9.2 9.4 9.7 9.4 8.7 9.9 5% 14%

Polymer Production 1.2 1.3 1.5 1.4 1.4 1.5 1.4 1.5 1.5 5% 2%

Polyester Production 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 -1% 1%

Intermediary Production 2.4 2.5 2.5 2.5 2.8 2.9 2.8 2.3 2.9 4% 27%

Standalone EBITDA/mt ($) 216 235 251 288 269 258 262 278 245 -9% -12%

Consol Petchem EBIT (Rs.bn) 49.6 57.5 64.4 78.6 81.2 82.2 79.8 75.1 76.0 -6% 1%

Polymer Deltas

PP-Propylene ($/mt) 298 319 287 285 216 259 237 303 170 -21% -44%

HDPE-Naphtha ($/mt) 669 626 677 640 557 590 515 461 419 -25% -9%

PVC-Naphtha-EDC ($/mt) 602 582 617 539 494 410 416 387 499 1% 29%

Polyester Deltas

POY-PTA-MEG ($/mt) 294 313 274 282 320 208 239 286 308 -4% 8%

PSF-PTA-MEG ($/mt) 204 249 214 153 144 132 188 185 167 16% -10%

PET-PTA-MEG ($/mt) 144 161 206 320 204 170 193 186 155 -24% -17%

Fibre Intermediary Deltas

PX-Naphtha ($/mt) 343 312 371 336 487 547 546 353 306 -37% -13%

PTA-PX ($/mt) 132 126 150 187 208 184 145 213 179 -14% -16%

MEG-Naphtha ($/mt) 572 531 598 531 476 374 285 203 224 -53% 10%

Oil & Gas

Total Oil & Gas Revenue (Rs.bn) 15.0 16.3 7.5 14.3 13.2 11.8 10.7 9.2 7.9 -40% -14%

Total Oil & Gas EBIT (Rs.bn) -2.7 -2.9 -6.0 -4.5 -4.8 -1.9 -2.7 -2.5 -3.1 na/nm na/nm

KG-D6 Gas Production (mmscmd) 5.5 4.9 4.3 4.1 3.5 1.9 1.8 1.8 1.7 -52% -5%

KG-D6 Oil Production (bbl/d) 1,957 1,902 1,856 1,538 1,196 - - - -

PMT Gas Production (mmscmd) 5.2 4.7 4.8 4.3 3.4 4.1 4.0 3.5 3.6 5% 3%

PMT Oil Production (bbl/d) 15,217 14,348 14,456 12,198 10,326 11,739 10,778 9,231 10,435 1% 13%

Domestic Oil & Gas EBIT (Rs.bn) -1.0 -0.9 -4.2 -2.5 -1.9 1.2 1.0 1.2 0.6 na/nm -49%

US Shale EBIT (Qtr Trailing) (Rs.bn) -1.7 -2.0 -1.6 -2.0 -2.9 -3.0 -3.5 -3.7 -3.5 na/nm na/nm

US Shale Revenue ($mn) (Current) 80 98 105 86 81 78 62 50 46 -43% -8%

US Shale EBITDA ($mn) (Current) 13 32 38 19 13 -1 -8 -14 -19 na/nm na/nm

US Shale Net Sales (mmscmd) 8.9 8.8 7.8 6.6 5.9 5.7 5.2 4.9 5.2 -12% 8%

US Shale Net Production (mmscmd) 10.3 10.0 9.0 7.4 6.5 6.4 5.9 5.5 6.1 -6% 11%

Cumulative Capex ($bn) 9.2 9.3 9.4 9.4 9.5 9.5 9.6 9.6 9.7 2% 1%





Exhibit 15: Detailed Quarterly metrics (Contd.)


Retail

Retail Revenue (Rs.bn) 146.5 188.0 241.8 258.9 324.4 355.8 366.6 382.0 412.0 27% 8%

Retail PBIDT (Rs.bn) 4.4 6.1 10.9 12.1 13.9 16.8 19.2 20.5 23.2 67% 13%

Retail EBIT (Rs.bn) 3.3 4.9 9.5 10.7 12.4 15.1 17.2 17.8 20.4 64% 15%

EBITDA Margin 3.0% 3.2% 4.5% 4.7% 4.3% 4.7% 5.2% 5.4% 5.6%

Store Count (No.s) 3,679 3,751 3,837 4,003 4,141 4,277 4,435 4,601 4,750 15% 3%

Retail Area (mn.sq.ft) 14.2 14.5 17.7 18.6 19.5 20.6 22.0 23.0 24.5 26% 7%

Cities Present 750 750 750 5,200 5,800 6,400 6,600 6,700 6,700 16% 0%

Digital Services-Telecom/Jio

Revenue 61,471 68,794 71,280 81,091 92,400 103,830 111,060 116,790 123,540 34% 6%

Expenditure 47,053 42,524 44,349 49,630 56,680 63,310 67,800 70,090 72,150 27% 3%

EBITDA 14,418 26,270 26,931 31,460 35,720 40,520 43,260 46,700 51,390 44% 10%

Depreciation 11,839 11,926 11,988 14,394 15,310 16,840 17,440 16,570 17,750 16% 7%

EBIT 2,579 14,344 14,943 17,066 20,410 23,680 25,820 30,130 33,640 65% 12%

Interest 6,734 6,638 7,113 7,676 9,960 10,910 12,940 16,600 18,710 88% 13%

Other Income 17 12 7 14 10 10 30 160 270 2600% 69%

PBT -4,138 7,718 7,837 9,405 10,460 12,780 12,910 13,690 15,200 45% 11%

Tax -1,432 2,674 2,732 3,286 3,650 4,470 4,510 4,780 5,300 45% 11%

PAT -2,706 5,044 5,104 6,119 6,810 8,310 8,400 8,910 9,900 45% 11%

ARPU (Rs/month) 156 154 137 135 132 130 126 122 120 -9% -2%

Average Subs (mn) 131 149 173 201 234 266 293 319 343 47% 8%

Cumulative Capex (Rs bn) 2,070 2,145 2,275 2,445 2,615 2,755 1,686 1,771 1,821 -30% 3%

Debt (Rs bn) 491 515 584 711 845 907 762 789 840 -1% 6%

Others

Other Segments Revenue (Rs.bn) 24.6 30.3 33.7 29.7 55.4 57.1 79.4 107.9 98.8 78% -8%

Other Segments EBIT (Rs.bn) 2.7 2.8 8.4 4.0 3.1 3.8 1.4 4.8 4.0 27% -17%

Others EBIT Margin (Rs.bn) 10.9% 9.1% 25.1% 13.3% 5.7% 6.6% 1.8% 4.5% 4.0%

Consol Balance Sheet (Rs.bn)

Gross Debt 2,141 2,132 2,188 2,421 2,587 2,744 2,875 2,882 2,920 13% 1%

Cash & Equivalent 770 786 781 795 767 779 1,330 1,317 1,347 76% 2%

Net Debt 1,371 1,346 1,407 1,626 1,820 1,964 1,545 1,565 1,572 -14% 0%

Creditors For Capex 752 750 760 790 820 820 580 580 580 -29% 0%

Capex 157 173 211 333 392 273 327 226 191 -51% -16%





Exhibit 15: Detailed Quarterly metrics (Contd.)


Consol P&L A/C (Rs.bn)

Gross Sales 1,012 1,099 1,291 1,417 1,563 1,707 1,541 1,730 1,639 5% -5%

Excise Duty 97 101 122 129 130 143 155 160 153 18% -4%

Net Revenue 915 998 1,169 1,288 1,433 1,564 1,387 1,570 1,485 4% -5%

COGS 613 657 823 900 1,005 1,114 926 1,100 1,002 0% -9%

OPEX 146 165 162 181 217 237 252 257 261 20% 2%

EBITDA 156 176 185 207 211 213 208 213 222 5% 4%

EBITDA Margin 17% 18% 16% 16% 15% 14% 15% 14% 15%

DD&A 43 45 49 52 52 52 53 50 53 2% 6%

Interest Cost 23 21 26 36 39 41 49 51 55 39% 7%

Other Income 23 22 22 18 13 25 27 31 36 189% 15%

PBT 113 132 133 137 132 144 133 143 150 14% 5%

Exceptionals - - - - - - 5 - -

PBT After Exceptionals 113 132 133 137 132 144 138 143 150 14% 5%

Current Tax 25 26 27 30 29 30 28 32 21 -29% -35%

Deferred Tax 8 11 11 12 7 11 6 10 16 124% 59%

PAT 81 94 95 95 95 104 104 101 113 18% 12%

Minority+Associates 0 0 -0 0 0 0 1 0 1 na/nm na/nm

Group PAT 81 94 95 95 95 104 104 101 114 19% 12%

EPS (Rs) 13.7 15.9 16.0 16.0 16.1 17.5 17.6 17.1 19.2 19% 12%

OCI -8 -9 -10 -16 -21 7 618 -1 -8 na/nm na/nm

Total CI 73 86 85 79 75 111 722 101 106 42% 5%

Adjusted PAT 81 94 95 95 95 104 101 101 114 19% 12%

Adjusted EPS (Rs) (inc OCI) 13.7 15.9 16.0 16.0 16.1 17.5 17.0 17.1 19.2 19% 12%

Shares O/S (bn) 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 0% 0%

Reported NPM 9% 9% 8% 7% 7% 7% 8% 6% 8%

Tax Rate 29% 29% 29% 31% 28% 28% 25% 29% 25%

Standalone Net Revenue (Rs.bn) 685 733 840 912 962 1,001 836 883 871 -9% -1%

Standalone EBITDA (Rs.bn) 130 137 134 152 149 145 137 136 137 -8% 0%

Standalone PAT (Rs.bn) 83 85 87 88 89 89 86 90 97 10% 7%

Total CI 74 76 71 73 76 103 696 89 88 16% -1%

Standalone Rep. EPS (Rs) Ex OCI 13.1 13.3 13.7 13.9 14.0 14.1 13.5 14.3 15.3 9% 7%





Key Financials (Consolidated)

Income Statement

Y/E Mar (Rs mn) FY18 FY19 FY20E FY21E FY22E

Revenue 39,16,770 56,71,350 61,47,493 66,52,437 71,34,261

Expenditure 32,75,010 48,32,170 52,06,738 54,89,609 58,68,982

EBITDA 6,41,760 8,39,180 9,40,755 11,62,828 12,65,279

Depreciation 1,67,060 2,09,340 2,29,506 2,29,428 2,41,321

EBIT 4,74,700 6,29,840 7,11,249 9,33,400 10,23,958

Other Income 88,620 81,410 1,25,656 1,26,541 1,06,176

Interest expenses 80,520 1,64,950 2,23,375 2,71,849 2,77,946

PBT 4,82,800 5,46,300 6,13,530 7,88,093 8,52,188

Tax 1,41,391 1,57,461 1,62,586 2,08,845 2,25,830

Extraordinary Items 10,870 4,940 0 0 0

Minority Int./Income from Assoc. 590 1,030 (3,149) (3,842) (4,705)

Reported Net Income 3,60,800 3,98,370 4,47,795 5,75,406 6,21,653

Adjusted PAT 3,52,869 3,94,809 4,47,795 5,75,406 6,21,653

Balance Sheet


Equity share capital 59,220 59,260 59,349 59,438 59,527

Reserves & surplus 28,75,840 38,11,860 42,03,280 46,99,117 52,27,763

Net worth 29,35,060 38,71,120 42,62,629 47,58,554 52,87,290

Minority Interest 35,390 82,800 79,651 75,808 71,104

Loan Funds 21,87,630 28,75,050 30,75,050 29,75,050 27,75,050

Net deferred tax liability 2,45,430 4,51,470 4,89,281 5,27,849 5,67,188

Total Liabilities 54,03,510 72,80,440 79,06,611 83,37,262 87,00,632

Net block 40,38,850 39,83,740 45,16,378 48,72,487 50,48,584

Investment 8,28,620 24,01,550 18,37,431 17,85,575 17,40,225

Current Assets 13,75,040 17,96,380 19,70,558 21,66,890 25,05,051

Cash & bank balance 42,550 75,120 1,04,788 1,47,870 3,39,797

Other Current Assets 84,480 1,26,380 1,36,990 1,48,242 1,58,979

Current liabilities & Provision 27,09,220 26,95,860 22,30,332 23,18,393 24,42,238

Net current assets (13,34,180) (8,99,480) (2,59,774) (1,51,503) 62,814

Misc. exp 0 0 0 0 0

Total Assets 54,03,510 72,80,440 79,06,611 83,37,262 87,00,632

Cash Flow


PBT (Ex-Other income) (NI+Dep) 3,94,180 4,64,890 4,87,874 6,61,551 7,46,012

Other Non-Cash items (14,110) (8,420) 0 0 0

Chg in working cap 1,61,580 (1,96,090) (5,72,226) (26,622) 16,950

Operating Cashflow 7,14,590 4,57,360 2,26,080 9,47,498 10,76,535

Capital expenditure (8,42,500) (78,640) (7,80,090) (6,03,662) (4,35,725)

Free Cash Flow (1,27,910) 3,78,720 (5,54,010) 3,43,836 6,40,811

Investments 370 (15,72,930) 5,64,119 51,855 45,351

Other Investing Cash Flow 70,610 5,80,100 0 0 0

Investing Cashflow (6,82,900) (9,90,060) (90,315) (4,25,266) (2,84,198)

Equity Capital Raised 29,630 40 89 89 89

Loans Taken / (Repaid) 2,21,620 6,87,420 2,00,000 (1,00,000) (2,00,000)

Dividend paid (incl tax) (39,160) (42,820) (59,525) (83,412) (97,712)

Other Financing Cash Flow (1,51,580) 79,370 (23,286) (23,979) (24,842)

Financing Cashflow (20,010) 5,59,060 (1,06,098) (4,79,151) (6,00,410)

Net chg in cash 11,680 26,360 29,668 43,082 1,91,927

Opening cash position 30,230 42,550 75,120 1,04,788 1,47,870

Closing cash position 42,550 75,120 1,04,788 1,47,870 3,39,797





Key Ratios

Profitability (%) FY18 FY19 FY20E FY21E FY22E

EBITDA Margin 16.4 14.8 15.3 17.5 17.7

EBIT Margin 12.1 11.1 11.6 14.0 14.4

Effective Tax Rate 29.3 28.8 26.5 26.5 26.5

Net Margin 8.7 6.9 7.3 8.7 8.8

ROCE 11.0 11.2 11.0 13.1 13.3

ROE 12.7 11.6 11.0 12.8 12.4

RoIC 27.9 22.2 19.9 21.4 21.9

Per Share Data (Rs) FY18 FY19 FY20E FY21E FY22E

EPS 59.6 66.6 75.5 96.8 104.4

CEPS 87.8 101.9 114.1 135.4 145.0

BVPS 495.6 653.2 718.2 800.6 888.2

DPS 6.0 6.5 8.4 11.7 13.7

Valuations (x) FY18 FY19 FY20E FY21E FY22E

PER 23.8 21.3 18.8 14.6 13.6

P/CEPS 16.1 13.9 12.4 10.5 9.8

P/BV 2.9 2.2 2.0 1.8 1.6

EV / Sales 2.5 1.8 1.7 1.6 1.5

EV / EBITDA 15.5 12.5 11.4 9.2 8.2

Dividend Yield (%) 0.4 0.5 0.6 0.8 1.0

Gearing Ratio (x) FY18 FY19 FY20E FY21E FY22E

Net Debt/ Equity 0.5 0.5 0.5 0.5 0.4

Net Debt/EBIDTA 2.4 2.5 2.5 1.9 1.5

Working Cap Cycle (days) (46.0) (19.0) (19.0) (19.0) (19.0)

Growth (%) FY18 FY19 FY20E FY21E FY22E

Revenue 28.3 44.8 8.4 8.2 7.2

EBITDA 38.9 30.8 12.1 23.6 8.8

EBIT 37.4 32.7 12.9 31.2 9.7

PAT 20.9 10.4 12.4 28.5 8.0

Quarterly (Rs mn) Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20

Revenue 14,33,230 15,63,970 13,86,590 15,69,760 14,85,260

EBITDA 2,11,080 2,13,170 2,08,320 2,13,150 2,21,520

EBITDA Margin (%) 14.7 13.6 15.0 13.6 14.9

PAT 95,490 1,03,760 1,04,270 1,01,410 1,13,520

EPS (Rs) 16.1 17.5 17.6 17.1 19.2


Shareholding Pattern (%) Jun-18 Sep-18 Dec-18 Mar-19 Jun-19

Promoters 46.2 46.2 46.2 46.2 46.2

FIIs 23.9 23.8 23.5 23.8 23.8

DIIs 11.2 11.5 12.0 11.6 11.4

Public and Others 18.7 18.5 18.3 18.4 18.6

Source: Capitaline




RECOMMENDATION HISTORY TABLE

Date Closing

Price TP

Period (months)

Rating Analyst

23-Sep-19 1,239 1,410 12m Hold Sabri Hazarika

11-Aug-19 1,162 1,375 12m Hold Sabri Hazarika

22-Jul-19 1,281 1,375 12m Hold Sabri Hazarika

10-Jun-19 1,319 1,335 12m Hold Sabri Hazarika

20-Apr-19 1,386 1,335 12m Hold Sabri Hazarika

28-Jan-19 1,230 1,335 12m Buy Sabri Hazarika

18-Jan-19 1,184 1,335 12m Buy Sabri Hazarika

31-Dec-18 1,121 1,360 12m Buy Sabri Hazarika

11-Dec-18 1,098 1,360 12m Buy Sabri Hazarika

18-Oct-18 1,151 1,360 12m Buy Sabri Hazarika

12-Oct-18 1,127 1,290 12m Buy Sabri Hazarika

04-Sep-18 1,242 1,300 12m Buy Sabri Hazarika

30-Jul-18 1,151 1,300 12m Buy Sabri Hazarika

13-Jul-18 1,100 965 12m Hold Sabri Hazarika

08-Jun-18 984 965 12m Hold Sabri Hazarika

30-Apr-18 963 965 12m Accumulate Sabri Hazarika

19-Jan-18 931 980 12m Accumulate Sabri Hazarika

14-Oct-17 876 843 12m Hold Dhaval Joshi

21-Sep-17 841 843 12m Hold Dhaval Joshi

21-Jul-17 793 759 12m Buy Dhaval Joshi

25-Apr-17 716 759 12m Buy Dhaval Joshi

19-Apr-17 684 759 12m Buy Dhaval Joshi

17-Jan-17 521 580 12m Buy Dhaval Joshi

21-Oct-16 532 580 12m Buy Dhaval Joshi


RECOMMENDATION HISTORY CHART

Source: Bloomberg, Company, Emkay Research

480

669

858

1047

1236

1425

22

-Oct-

16

21

-Apr-

17

19

-Oct-

17

18

-Apr-

18

16

-Oct-

18

15

-Apr-

19

13

-Oct-

19

BUY Hold SellAccumulate Reduce PriceTarget Price




Emkay Alpha Portfolio – Oil & Gas

EAP sector portfolio

Company Name BSE200 Weight

EAP Weight

OW/UW (%)

OW/UW (bps)

EAP Weight (Normalised)

Oil & Gas 10.23 10.03 -2% -20 100.00

BPCL 0.62 0.62 0% 0 6.09

GAIL 0.40 0.43 7% 3 4.20

Gujarat Gas 0.00 0.00 NA 0 0.00

Gujarat State Petronet 0.10 0.00 -100% -10 0.00

Gulf Oil Lubricants 0.00 0.00 NA 0 0.00

HPCL 0.38 0.41 8% 3 4.00

Indian Oil 0.59 0.59 0% 0 5.75

Indraprastha Gas 0.20 0.10 -50% -10 0.98

Petronet LNG 0.32 0.00 -100% -32 0.00

Oil India 0.08 0.00 -100% -8 0.00

ONGC 0.68 0.31 -55% -38 3.00

Reliance Industries 6.85 7.57 10% 72 73.98

Cash 0.00 0.20 NA 20 2.00

Source: Emkay Research

* Not under coverage: Equal Weight

High Conviction/Strong Over Weight High Conviction/Strong Under Weight

Sector portfolio NAV

Base Latest

01-Apr-19 18-Jul-19 17-Sep-19 17-Oct-19

EAP - Oil & Gas 100.0 90.9 86.2 98.7

BSE200 Neutral Weighted Portfolio (ETF) 100.0 91.8 86.9 99.6

*Performance measurement base date 1st April 2019


NAV chart


Please see our model portfolio (Emkay Alpha Portfolio): SMID

Please see our model portfolio (Emkay Alpha Portfolio): Nifty

80

85

90

95

100

105

Apr-19 Apr-19 May-19 Jun-19 Jul-19 Jul-19 Aug-19 Sep-19 Oct-19

NAV

EAP - Oil & Gas BSE200 Neutral Weighted Portfolio (ETF)

Analyst: Sabri Hazarika

Contact Details

[email protected]

+91 22 6612 1282

Sector

Oil & Gas

Analyst bio

Sabri Hazarika holds an MBA and comes

with 11 years of research experience. His

team currently covers 12 stocks in the

Indian Oil & Gas space.

https://web3.emkayglobal.com/ResearchAccess/Upload/SMID_Oct19.pdf

https://web3.emkayglobal.com/ResearchAccess/Upload/Nifty_Oct19.pdf

mailto:[email protected]




Emkay Rating Distribution

Ratings Expected Return within the next 12-18 months.

BUY Over 15%

HOLD Between -5% to 15%

SELL Below -5%

Completed Date: 20 Oct 2019 23:48:30 (SGT) Dissemination Date: 20 Oct 2019 23:49:30 (SGT)

Sources for all charts and tables are Emkay Research unless otherwise specified.

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Tel: +91 22 66121212 Fax: +91 22 66121299 Web: www.emkayglobal.com

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SINGAPORE

DBS Bank Ltd

Contact: Janice Chua

12 Marina Boulevard, Marina Bay Financial Centre Tower 3

Singapore 018982

Tel. 65-6878 8888

Fax: 65 65353 418

e-mail: [email protected]

Company Regn. No. 196800306E

THAILAND

DBS Vickers Securities (Thailand) Co Ltd

Contact: Chanpen Sirithanarattanakul

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9th, 14th-15th Floor

Rama 1 Road, Pathumwan,

Nagkok Thailand 10330

Tel. 66 2 857 7831

Fax: 66 2 658 1269


Company Regn. No 0105539127012

Securities and Exchange Commission, Thailand

INDONESIA

PT DBS Vickers Sekuritas (Indonesia)

Contact: Maynard Priajaya Arif

DBS Bank Tower

Ciputra World 1, 32/F

JI. Prof. Dr. Satrio Kav. 3-5

Jakarta 12940, Indonesia

Tel. 62 21 3003 4900

Fax: 62 21 3003 4943





Sabri Hazarika

[email protected]

+91 22 6612 1282

Documents

as of (October 18, 2019) by Retail, Jio beat · Reliance Industries’ (RIL) Q2FY20 consolidatedEBITDA grew5% yoyand 4% qoq to Rs221.5bn, in line with our estimate. PAT rose 19% yoy