Reliance Industries has announced kinda sorta okay results. Revenues are down 33% in the quarter to 70,000 cr. but profits are up, because their costs have fallen too (lower crude prices as crude is their largest input)
EPS growth has taken a big hit as the stock’s 12 month EPS growth is at 4.7%. At current EPS of 80, the stock trades at a trailing P/E of about 11.5x with the price at about Rs. 926.
Debt levels have gone up considerably, with new capex in place for everything (from petrochemicals to refining to even Reliance Jio and Retail)
Gross Refining Margins (GRM) are at $10.1 per barrel even with the drop in crude prices, a nice surprise as it would be expected to contract on falling crude prices and a lower light-heavy differential.
The Exploration business continues to suck. Look at yields on their best fields:
The View
For what it’s worth, the big deal will be Jio, the telecom mover. The rest of the businesses are in decline, and even the $10 GRM is probably a one-off. Their new subsidiaries in the form of TV18 and Network18 are not significant in terms of numbers.
The Jio deal will be 4G broadband access, and what might be a mouth-wateringly low cost. This can drive massive revenues to Reliance, and potential drive them to even acquire a large telecom company to grow.
Reliance will also start operating fuel pumps. This was, earlier, a dead deal because the government decided to subsidize petrol and diesel sold through the public sector marketing companies (IOC, BPCL and HPCL)
Overall results are weak, and RIL is down today; this stock has no technical reasons to stay in other than at 1000 or above.
Note: No positions.
