RIL = RELIANCE INDUSTRIES LTD = RESULTS ANALYSIS OF = Q2 FY 2011-12 = HEALTHY PERFORMANCE IN MOST SEGMENTS = FUTURE PROMISING

Reliance
  
Industries

Limited

Ø RECORD HALF YEARLY REVENUE, PBDIT AND NET PROFIT

Ø NET PROFIT OF ` 11,364 CRORE ($ 2.3 BILLION)

Ø PBDIT OF ` 21,950 CRORE ($ 4.5 BILLION)

Ø STRONG RECOVERY IN REFINING MARGINS – UP 32%

Reliance Industries Limited (RIL)  reported its financial performance for the quarter / half year ended 30th September, 2011. Highlights of the un-audited financial results as compared to the corresponding period of the previous year are:

(In ` Crore)	2Q FY12	1Q FY12	2Q FY11	% Change wrt 2Q FY11
Turnover	80,790	83,689	59,962	34.7%
PBDIT	10,946	11,005	10,068	8.7%
Profit Before Tax	7,317	7,264	6,149	19.0%
Net Profit	5,703	5,661	4,923	15.8%
EPS (`)	17.4	17.3	15.1	15.2%

(In ` Crore)	1H FY12	1H FY11	% Change wrt 1H FY11
Turnover	164,479	120,969	36.0%
PBDIT	21,950	20,132	9.0%
Profit Before Tax	14,581	12,187	19.6%
Net Profit	11,364	9,774	16.3%
EPS (`)	34.7	29.9	16.1%

Highlights of Half Year’s Performance

                 Turnover increased by 36.0% to Rs.164,479 crore ($ 33.6 billion)

                 Exports increased by 52.2% to Rs.101,872 crore ($ 20.8 billion)

                 PBDIT increased by 9.0% to Rs.21,950 crore ($ 4.5 billion)

                 Profit Before Tax increased by 19.6% to Rs.14,581 crore ($ 3.0

                        billion)

                 Cash Profit increased by 4.6% to Rs.17,828 crore ($ 3.6 billion)

                 Net Profit increased by 16.3% to Rs.11,364 crore ($ 2.3 billion)

                 Gross Refining Margin at $ 10.1/bbl for the quarter and $ 10.2/bbl

                        for the half  year ended 30th September 2011

CORPORATE HIGHLIGHTS

Ø     Reliance Industries Limited (RIL) announced a rich gas and condensate discovery in the very first well drilled in the block CY-PR-DWN-2001/3(CYPR-D6) located in deepwater Cauvery-Palar basin. The block with an area of about 8600 sq km was awarded to RIL under the bidding round of NELP-III. This is one of the exploration blocks where BP has 30% participating interest.

Ø     

Ø     On 30th August 2011, RIL and BP announced the completion of BP‟s acquisition of a 30% stake in 21 oil and gas production sharing contracts (PSCs) that Reliance operates in India, including the producing KG- D6 block.

Commenting on the results, Mukesh D. Ambani, Chairman and Managing Director, Reliance Industries Limited said: “Our first half financial performance has been consistent. The increase in profits was largely driven by improved performance in the refining and petrochemicals business. All our manufacturing facilities operated at record levels with refineries achieving operating rates of 110%. RIL has strong balance sheet and sustained earning base to pursue growth opportunities.”

FINANCIAL PERFORMANCE REVIEW

AND ANALYSIS

RIL achieved a record turnover for the half year ended 30th September 2011 of ` 164,479 crore ($ 33.6 billion), an increase of 36.0% on a year-on-year basis. Increase in volumes accounted for 3.5% growth in revenue and higher prices accounted for 32.5% growth in revenue. Exports were higher by 52.2% at ` 101,872 crore ($ 20.8 billion) as against ` 66,936 crore in 1H FY10-11. 

Higher crude prices resulted in consumption of raw materials increasing by 44.4% to ` 129,104 crore ($ 26.4 billion) on a year-on-year basis. 

Employee costs were at ` 1,593 crore ($ 325 million) for the half year as against ` 1,277 crore. 

Other expenditure increased by 17.3% from Rs. 7,452 crore to Rs.8,743 crore ($ 1.8 billion) due to higher power & fuel expenses and exchange difference.

Operating profit before other income and depreciation increased by 5.5% from Rs.18,738 crore to Rs.19,770 crore ($ 4.0 billion). Net operating margin was lower at 12.0% as compared to 15.5% in the corresponding period of the previous year due to base effect.

Other income was higher at  Rs.2,180 crore ($ 445 million) as against Rs. 1,394 crore on a year-on-year basis primarily due to higher average liquid investments.

Depreciation (including depletion and amortization) was lower by 10.2% at  Rs.6,164 crore ($ 1.3 billion) against  Rs.6,862 crore in 1H FY 2010-11 due to lower depletion charge in oil & gas as a consequence of the transfer of 30% Participating Interest (PI) in 21 blocks to BP.

Interest cost was higher at Rs.1,205 crore ($ 246 million) as against Rs.1,083 crore in 1H FY 2010-11 principally due to higher foreign exchange difference. This resulted in gross interest cost being higher at  Rs.1,481 crore ($ 302 million) as against Rs.1,311 crore in 1H FY 2010-11. 

Interest capitalized was higher at Rs.276 crore ($ 56 million) as against Rs. 228 crore.

Profit after tax was Rs.11,364 crore ($ 2.3 billion) as against Rs.9,774 crore for the corresponding period of the previous year.

Basic earnings per share (EPS) for the half year ended 30th September 2011 was Rs.34.7 ($ 0.70) against Rs.29.9 for the corresponding period of the previous year.

Outstanding debt as on 30th September 2011 was Rs.71,399 crore ($ 14.6 billion) compared to Rs. 67,397 crore as on 31st March 2011. Net gearing as on 30th September 2011 was 5.4% as against 13.5% as on 31st March 2011.

RIL had cash and cash equivalents of Rs.61,490 crore ($ 12.6 billion). These were in fixed deposits, certificate of deposits with banks, mutual funds and Government securities / bonds. RIL‟s net debt was equivalent to 0.2 time annualized PBDIT for the half year ended 30th September 2011.

The net capital expenditure towards projects for the half year ended 30th September 2011 was Rs.6,691 crore ($ 1.4 billion). However, cash outflow on account of capex for the first half amounted to Rs.3,533 crore ($ 721 million).

RIL has domestic credit ratings of AAA from CRISIL and FITCH. RIL has investment grade ratings for its international debt from Moody‟s and S&P as Baa2 and BBB respectively.

COMMENTS :- There are several segments / divisions in RIL – all of which have ambitious expansion Plans of their own. Many moves already made by RIL are likely to yield excellent sales and Profits in the quarters / years to come. The JVs and the agreements with the likes of BP will further enhance its capabilities in the times to come.

Excessive emphasis of Investors on KG-D6 performance alone seems unnecessary – as the overall performance of all Divisions of RIL is bound to be always moving ahead quickly, neutralizing any adverse performance in  one or two divisions. When the other divisions attain size soon – RIL’s performance can be expected to be much Higher compared to its present size and performance.

First Half year has yielded an EPS of Rs.34.7. Hence, on the same basis, annual EPS must be around Rs.69.4.

Current Market price is Rs.709.70 – the  52 week high price being 1091.40 and 52 week low price  being Rs.707.20.

On this basis, the PE Ratio is 10.23. For RIL, this PE Ratio is considered very Low – and is mainly due to current adverse market conditions. For medium / long term Investors, RIL at current prices seems an Excellent BUY.

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