Reliance Industries - 1QFY2013 Result Update - Angel Broking

For 1QFY2013, Reliance Industries (RIL) reported better-than-expected net profit due to higher-than-expected profit from refining segment and lower-than-expected tax rate. We maintain our Neutral view on the stock.

Petchem and refining segment drive top-line growth: RIL's net sales increased by 13.4% yoy to Rs.91,875cr, above our estimate of Rs.80,884cr. Net sales growth was mainly driven by the increases in gross sales of petrochemicals segment (+18.9% yoy to Rs.21,839cr) and refining segment (+15.9% yoy to Rs.85,383cr). RIL's KG-D6 gas production fell to 33mmscmd in 1QFY2013 (49mmscmd in 1QFY2012).

EBITDA decreased by 32.0% yoy: RIL's EBITDA decreased by 32.0% yoy to Rs.6,747cr on account of lower profits from all its three main segments. The refining segment's EBIT decreased by 32.8% yoy to Rs.2,151cr, the petrochemical segment's EBIT decreased by 20.7% yoy to Rs.1756cr and the oil and gas segment's EBIT decreased by 34.0% yoy to Rs.972cr during the quarter.

Higher other income and lower tax rate muted decline in PAT: Other income increased by 76.6% yoy to Rs.1,904cr due to higher treasury income. Depreciation and depletion expenses decreased by 23.8% yoy to Rs.2,434cr due to lower depletion charges. Tax rate stood at 17.7% in 1QFY2013 (lower than our estimate), compared to 22.1% in 1QFY2012. Hence, despite the 32.0% decline in EBITDA, the company's PAT decreased by only 21.0% yoy to Rs.4,473cr (above our estimate of Rs.4,077cr).

Outlook and valuation: RIL's profits continued to decline from all three segments, refining, petrochemical and oil and gas during 1QFY2013. Further, there are concerns on declining gas production from KG D6 block. RIL has stated that additional investments will be required to increase production from KG D6. However, gas production is unlikely to increase during FY2013-14 in our view. Hence, we maintain our Neutral view on the stock.

Source : Equity Bulls

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