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Reliance: Continues the good run… - Views on News from Equitymaster
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  • Jan 31, 2001

    Reliance: Continues the good run…

    Reliance has once again reported impressive results with the topline growing by more than 57% for the nine months ended December '00. However, on a quarter basis the topline has grown by 30%.

    (Rs m) 3QFY00 3QFY01 Change 9m FY00 9m FY01 Change
    Sales 50,340 65,550 30.2% 137,070 215,640 57.3%
    Other Income 1,480 510 -65.5% 4,260 2,050 -51.9%
    Expenditure 40,210 52,000 29.3% 109,810 177,200 61.4%
    Operating Profit (EBDIT) 10,130 13,550 33.8% 27,260 38,440 41.0%
    Operating Profit Margin (%) 20.1% 20.7%   19.9% 17.8%  
    Interest 2,760 2,940 6.5% 6,990 9,250 32.3%
    Depreciation 2,580 3,530 36.8% 7,050 10,180 44.4%
    Profit before Tax 6,270 7,590 21.1% 17,480 21,060 20.5%
    Tax - -   - -  
    Profit after Tax/(Loss) 6,270 7,590 21.1% 17,480 21,060 20.5%
    Net profit margin (%) 12.5% 11.6%   12.8% 9.8%  
    No. of Shares (eoy) 934 1,054   934 1,054  
    Diluted Earnings per share* 23.8 28.8   20.7 25.0  
    P/E Ratio   13.3     15.4  

    Production volume for the first nine months of FY01 grew by 24% to 7.9 from 6.4 m tonnes. The sales include merchant sales of Rs 22.7 bn and inter-divisional sales of Rs 37.2 bn. Adjusting for these items the sales still grow by 55% for the first nine months of FY01. Sales (excluding merchant sales) has grown by 41% in 9m FY01. The topline was driven by a 32% growth in volumes and a 9% growth in realisations. Expenses of the company are up sharply in the 9 month period indicating the firm naphtha prices, which have impacted the company's margins.

    Operating profits are up a healthy 34% for the quarter. The company has increased its OPM by 60 basis points this quarter as compared to the 400 basis points drop in the previous quarter. However, on a 9 month basis the OPM is down 210 basis points. This is due to the severe pressure on the OPM during 1HFY01. With oil markets cooling off in 4QFY01 the pressure on margins is expected to subside, positively impacting the company's operating profits.

    Reliance has reiterated its intention of focusing on new growth areas. It new initiative include power, telecom and infocom. It is also planning on consolidating the balance sheet of Reliance Petroleum (RPL) in FY02 and to consolidate the balance sheet of Bombay Suburban Electricity Supply (BSES) at a later date. This should further boost the bottomline of RIL.

    At Rs 384 the company is trading at a multiple of 13.3x on 3QFY01 annualised earnings. On a 9 month time frame the company trades on a multiple of 15.4x annualised earnings.



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