Angel Broking neutral on Reliance Industries

Angel Broking has maintained neutral rating on Reliance Industries, in its July 23, 2012 research report.

“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.”

“RIL’s net sales increased by 13.4% yoy to Rs91,875cr, above our estimate of Rs80,884cr. Net sales growth was mainly driven by the increases in gross sales of petrochemicals segment (+18.9% yoy to Rs21,839cr) and refining segment (+15.9% yoy to Rs85,383cr). RIL’s KG-D6 gas production fell to 33mmscmd in 1QFY2013 (49mmscmd in 1QFY2012). RIL’s EBITDA decreased by 32.0% yoy to Rs6,747cr on account of lower profits from all its three main segments. The refining segment's EBIT decreased by 32.8% yoy to Rs2,151cr, the petrochemical segment's EBIT decreased by 20.7% yoy to Rs1756cr and the oil and gas segment's EBIT decreased by 34.0% yoy to Rs972cr during the quarter. Other income increased by 76.6% yoy to Rs1,904cr due to higher treasury income. Depreciation and depletion expenses decreased by 23.8% yoy to Rs2,434cr 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 Rs4,473cr (above our estimate of Rs4,077cr).”

“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,” says Angel Broking research report.   

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