Reliance Industries falls 7% post Q2 results

The stock dipped 7% to Rs 1,073 on the BSE in early morning trade after a mixed bag results for the quarter ended September 2018

Shares of Reliance Industries (RIL) has dipped 7% to Rs 1,073 on the BSE in early morning trade after reporting mixed set of numbers for the quarter ended September 2018 (Q2FY19) with its retail and digital services (telecom; Jio) businesses continuing to post strong growth, while its core refining business performance was a bit disappointing amid high expectations.

RIL has reported a 17.4% rise in consolidated net profit at Rs 95.16 billion for the September quarter, largely helped by a record financial performance in its petrochemicals business. The company had a profit of Rs 81.09 billion in the same quarter last fiscal year.

Consolidated revenue in the quarter stood at Rs 1.56 trillion, recording a 54.5% rise from Rs 1.01 trillion in the same period last year. Refining margins for the company took a hit, with gross refining margins slipping back to a single digit.

RIL reported gross refining margins (GRM) at $9.5 per barrel for Q2, against the street expectation of about $10 from $12 a year ago and $10.5 in the previous quarter.

“US$9.5/bbl GRM was down US$1 QoQ due to weaker gasoline/kero cracks (from higher supplies, trade war concerns, crude volatility), higher FO cracks/lower Light-Heavy differential (due to Russian refinery shutdowns), and 2-3 weeks of FCCU outage,” Emkay Global Financial Services said in result update.

The brokerage firm EBITDA estimate for FY19 remains unchanged despite building petcoke from FY20 now due to better Retail numbers.

“We slightly cut FY19/20E PAT by 2%/3% due to lower other income/higher depreciation. However, we roll our valuation to FY21 and realign our target multiples to conservative levels due to mixed macro outlook in refining/petchem. Jio should report strong earnings growth due to healthy subs and stable ARPUs from high data usage besides no access charges from FY21,” it added.

“We retain our HOLD rating on RIL, but revise our target price upwards to Rs 1,180 share (from Rs 1105/share) as we revise our earnings estimates to adjust for a) higher crude prices assumption of around USD75/bbl and USD 80/bbl (from USD 70/bbl) for FY19/20e), weaker INR/USD exchange rate assumption of Rs 70/USD and Rs 72/USD (from RS 68/USD) in FY19/20e and tweak GRM estimates to USD 12/bbl in FY20e (earlier USD 13/bbl) to reflect current trends in refining environment,” analysts at Antique Stock Broking said in result preview.

Meanwhile, in order to expedite its vision of connecting 50 million homes across 1100 cities with JIO-GIGA Fiber, RIL acquired majority stakes in Den Networks and Hathway Cable and Datacom. The same shall be followed by an open offer.

RIL on Wednesday said it will invest Rs 29.40 billion in Hathway for 51.3% stake via a preferential issue of shares at a share price of Rs 32.35 per share. In DEN, RIL will be making a primary investment of Rs 20.45 billion through a preferential issue at Rs 72.66 per share and a secondary purchase of Rs 2.45 billion from existing promoters Sameer Manchanda and others. The transaction will give RIL 66% stake in the company.

At 09:35 am; RIL was trading 5% lower at Rs 1,086 on the BSE.  A combined 7.31 million equity shares changed hands on the BSE and NSE so far.

Den Networks too trading 4% lower at Rs 72.90 on the BSE. The stock hit a high of Rs 79 and a low of Rs 72.35 so far. Hathway Cable, however, was trading 4% higher at Rs 30.70, after hitting a high of Rs 32.45 in intra-day trade. In comparison, the S&P BSE Sensex was down 1.2% or 420 points at 34,359.