January 19, 2017 / 15:38 IST
Reliance Industries (RIL) delivered subdued operational performance for Q3FY17 with 3% miss on EBIT, dragged by tad‐lower GRM (USD10.8/bbl versus estimated USD11/bbl). While refining EBIT missed estimate by 5%, petchem surprised positively by 8% led by strong polymer deltas (PP, PVC) and firm spreads in polyester chain (MEG, POY). PAT of INR 80bn (up 10% YoY, 4% QoQ) surpassed estimates by 2% on higher treasury income.
Outlook
Following commissioning of mega core projects, we expect FCF to turnaround, RoE will rise and profits will double in 5 years. The successful RJIO launch enhances our confidence on the mega telecom business. The stock is inexpensive at 1.1x FY18E P/BV – RIL earns healthy RoE of 11.6% even with half its balance sheet being capital work‐inprogress. Reiterate ‘BUY/SO’, with a SoTP‐based TP of INR 1,413, highest on the Street.
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