Other key highlights
² Low oil prices and demand for light
distillates particularly transportation fuels continue to fuel demand
² Gasoline demand
growth has remained strong in India and China driven by strong record auto
sales. Gasoil demand has been strong in Europe and India. Jet kero demand
remained strong on the back of increasing miles travelled.
² Large benefits
continue to exist for petcoke gasification project at current LNG prices of
US$7.5/mmbtu and pet coke price of $1.5/mmbtu.
² Highest ever
quarterly production of ULSD at 4.2mn tons was achieved in line with strategy
to maximize ULSD in view of better realization against 500 ppm diesel
² The company has
opened 762 retail outlets so far and can boast of the largest average throughout
per outlet of 200KLPM and aims to double it
² Domestic marketing volumes ‐ Retail &
Bulk reached 2.3 Million KLPA level on exit rate basis in Dec’15
² With regards to the
petcoke gasification project, utilities systems are at start up stage and
gasifiers are expected to commence operations from the H2 of CY16. The company
has maintained its guidance of US$2.5/bbl to GRM gains from the project in
spite of current difficult environment.
Retail
segment performance continues to improve
Retail segment
revenues for Q3 FY16 were higher by 28.9% yoy. In terms of profitability the
segment reported an EBIT of Rs. 147cr as compared to Rs. 133cr in Q2 FY16.
PBIDT was at Rs. 243cr up 15.7% yoy. The improvement was on the back of better
gross margins across the segments. The company has focused on enhancing its
inventory management and has also been able to increase the penetration of its
own brands. Benefits of operating leverage and higher contribution of better
margin digital and fashion segment provided additional boost to the margins.
Reliance Jio – vast service offerings at ARPUs similar to
incumbent players
² Robust jump in 4G phones sold in the year
in India so far.
² Devices availability has enhanced
ecosystem for Jio
² Voice has been working fine both on volte
and WiFi
² Fibre spread is on target. .. jio centres
are present across the country.
² Extensive testing phase on.
·
Launched
services for RIL group employees and family and friends on trial basis
·
More than 60,000
people joined from 1,100 location in India
·
End‐to‐end
services being offered
·
Vendors and
channel partners also involved
·
Large scale
simulation of full services being offered
Maintain
BUY
Over the next three
years, we believe, these core businesses of refining and petrochemicals will
drive a strong 25% CAGR in standalone EBIDTA on the back of commencement of
large scale projects ‐ off gas cracker and petcoke gasification.
The petcoke
gasification project whereby RIL is investing US$4bn is expected to commence
operations in FY17. Commencement of this project will allow RIL to replace
expensive RLNG with gas produced from petcoke leading to incremental US$2/bbl
GRM (management guidance of US$2.5/bbl). Off gas cracker will provide a
consistent low cost supply of feedstock to the petrochemical plants where RIL
is increasing its capacity. While the global environment has been moderately
improving form GRMs and petrochemical spreads, RIL will outperform the
benchmarks by a significant margin.
The domestic
E&P segment will continue to reel under pressure of falling production,
lower prices and bureaucratic issues. Shale gas too will continue to see
pressure as realizations will remain weak. While Telecom business might achieve
EBIDTA breakeven in three years considering its asset light model, Retail
business will show improved trend in profitability. We are raising our
estimates to factor in higher than expected PAT in Q3 FY16. However, P/E
valuations of 9.7x on FY17E earnings is much below RIL’s historical average and
we believe a re‐rating is due given strong earnings growth profile in the
coming years. We maintain BUY with a 1‐year price target of Rs1,200 (raised
from Rs1,150 earlier).
