Angel Broking neutral on Reliance Industries

Angel Broking's research report on Reliance Industries (RIL)

"RIL's 1QFY2014 net sales declined by 4.6 percent yoy to Rs 87,645cr, although it was above our estimate of Rs 82,561cr. The decline in net sales was mainly led by lower Refining segment sales (-4.6 percent yoy to Rs 81,458) and lower Oil & Gas segment sales (-42.0 percent yoy to Rs 1,454cr). The company's KG-D6 gas production fell to 15mmscmd compared to 33mmscmd in 1QFY2013." "RIL's EBITDA, however, increased by 4.9 percent yoy to Rs 7,075cr, on account of higher profits from the Refining and Marketing segment. The Refining segment's EBIT grew by 38.5 percent yoy to Rs 2,951cr. The company's GRM stood at US$8.4/bbl in 1QFY2014 compared to US$7.6/bbl in 1QFY2013. Lower depreciation and higher other income boosts PAT: During the quarter, the depreciation (including depletion) expense declined by 12.2 percent yoy to Rs 2,138cr due to lower oil and gas production. Other income grew by 33.1 percent yoy to Rs 2,535cr. Hence, PAT increased by 18.9 percent yoy to Rs 5,352cr (in-line with our estimate of Rs 5,392cr)." Outlook and valuation: "For 1QFY2014, RIL's Refining segment's profit increased sharply; however, its Oil & Gas segment's profitability continued to decline. Looking ahead, concerns with regards low gas production from the KG D6 block continue to persist. Hence, we do not expect any significant impact on RIL's profitability due to gas price hike over FY2014-15. Hence, we maintain our Neutral view on the stock," says Angel Broking research report. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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