RIL: Petering pricing power - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

RIL: Petering pricing power

Jan 3, 2002

The business environment for petrochemical producers, especially downstream synthetic manufacturers, remains challenging. Reliance Industries Ltd. (RIL) recently announced product prices for the month of January '02, which indicated that pricing power in the industry continues to remain weak. While product prices have been declining through the year, much of the weakness seems to have set-in the third quarter of the current fiscal. The drop in prices, YoY, across the board gives an indication of the vulnerability in product pricing. Month on month (MoM), polyester prices continued to slide but some amount of stability seems to have entered polymer markets. December '01 was the worst month in terms of pricing power with the company slashing prices across the board, which could be to revive demand and respond to competitive pressure.

 MoMYoY
POY -3.9%-13.2%
PSF -4.6%-18.1%
PTA 0.0%-18.5%
MEG -3.8%-24.2%
PE 0.0%-14.2%
PP 0.0%-8.9%
PVC 3.3%-20.0%
PET 0.0%-1.8%
LAB 0.0%0.0%
Jan '02 prices
Business environment remains weak with a marked slowdown in domestic and global economic growth. Cumulative exports for the first six months of the current fiscal have declined in every month. Textiles constitute the third largest share of India's exports basket. Readymade garment exports, a component of textiles, is reportedly most affected. Also, synthetic textile exports, for the first five months of FY02, have reportedly declined by 5% YoY. The weakness in demand and increased competition has put pressure on pricing. Adding to the challenges, is the bumper cotton crop this fiscal. With softer cotton prices, synthetic textiles prices have been kept under check.

While MoM polymer prices have exhibited some stability, realisations YoY have reported a similar performance to polyesters. This could be due to increased competitive pressure in the industry with Haldia Petrochemicals Ltd. commissioning operations over the last 12-18 months and subsequently ramping up operating rates.

That said, petrochemical producers are likely to have experienced some amount of respite in operating margins, as naphtha prices have softened with weakness in the oil markets. But the decline in feedstock and product prices is not commensurate. Also, oil and naphtha prices have started firming up with the Organisation of Petroleum Exporting Countries (OPEC) cutting production by 1.5 m barrels/day (mbd).

At Rs 303.6 the stock trades on a multiple of 12.1x 1HFY02 annualised earnings. As feedstock prices increase, prevention in margin erosion is likely to depend on a turnaround in demand, which could instill pricing power.


Equitymaster requests your view! Post a comment on "RIL: Petering pricing power ". Click here!

  

More Views on News

RELIANCE IND. 2019-20 Annual Report Analysis (Annual Result Update)

Aug 5, 2020 | Updated on Aug 5, 2020

Here's an analysis of the annual report of RELIANCE IND. for 2019-20. It includes a full income statement, balance sheet and cash flow analysis of RELIANCE IND.. Also includes updates on the valuation of RELIANCE IND..

RELIANCE IND. Announces Quarterly Results (1QFY21); Net Profit Up 27.8% (Quarterly Result Update)

Jul 31, 2020 | Updated on Jul 31, 2020

For the quarter ended June 2020, RELIANCE IND. has posted a net profit of Rs 129 bn (up 27.8% YoY). Sales on the other hand came in at Rs 912 bn (down 43.5% YoY). Read on for a complete analysis of RELIANCE IND.'s quarterly results.

RELIANCE IND. Announces Quarterly Results (4QFY20); Net Profit Down 36.5% (Quarterly Result Update)

May 4, 2020 | Updated on May 4, 2020

For the quarter ended March 2020, RELIANCE IND. has posted a net profit of Rs 66 bn (down 36.5% YoY). Sales on the other hand came in at Rs 1,393 bn (down 1.7% YoY). Read on for a complete analysis of RELIANCE IND.'s quarterly results.

RELIANCE IND. 2018-19 Annual Report Analysis (Annual Result Update)

Jul 25, 2019 | Updated on Jul 25, 2019

Here's an analysis of the annual report of RELIANCE IND. for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of RELIANCE IND.. Also includes updates on the valuation of RELIANCE IND..

More Views on News

Most Popular

Large Opportunities Are Coming Our Way

Aug 5, 2020

Kenneth Andrade tells us why stocks will bounce back strongly and what he's bullish on.

Is It Time to Book Profits in Gold and Silver? (Fast Profits Daily)

Aug 10, 2020

Gold and silver have delivered phenomenal returns this year. Is it time to take some money of the table?

Forget the Nifty and Sensex for the Next 1 or 2 Years and Focus on These Stocks (Profit Hunter)

Aug 6, 2020

Stocks from the essential small cap space are likely to be outperformers over the next 1 or 2 years.

This 20 Year Cycle Suggests Gold is Set for an August Rally (Profit Hunter)

Jul 31, 2020

The real reason why gold prices will go up more.

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

RELIANCE IND. SHARE PRICE


Aug 13, 2020 03:37 PM

TRACK RELIANCE IND.

  • Track your investment in RELIANCE IND. with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

RELIANCE IND. 8-QTR ANALYSIS

COMPARE RELIANCE IND. WITH

MARKET STATS