Buy Reliance Industries; target of Rs 1178: HDFC Securities

HDFC Securities's research report on Reliance Industries

RIL’s  standalone  numbers  continued  to  impress,  led  by higher Petchem volumes and margins. Petchem production volumes were up 10% QoQ and 42% YoY to  8.8  mT  owing  to  ROGC  ramp up. EBIT/kg of sales volumes stood at Rs 17.87/kg (Rs 17/kg in 3Q, 13.2/kg in 4QFY17). EBIT margin was up 356bps YoY to  17.2%.  Q4  EBITDA  came  in at Rs 134.25bn (+19% YoY). Higher interest cost, depreciation charges and taxes partially offset growth, and PAT stood at Rs 86.97bn (+6.7% YoY).

Outlook

Our SOTP-based target for RIL is Rs 1,178/sh based  on  Mar-20  earnings (6.5x EV/e for standalone refining, 8x EV/e for petchem, Rs 19/sh for domestic E&P, 1x EV/invested capital for Shale/Retail and  10x  EV/e  for  Telecom  (Rs  420/sh). Maintain BUY. Refer our note on Reliance Jio for Telecom.