X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Reliance: 4QFY03 blues - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Apr 24, 2003

    Reliance: 4QFY03 blues

    Reliance Industries declared its fourth quarter and full year performance for the year ended March 2003. While revenues have risen by 9% for FY03, net profit has leapfrogged by 27%. The rise in net profit could be attributed to lower interest expenses and higher other income. Though operating margins for the full year have declined only marginally, in 4QFY03, there is a sharp correction.

    (Rs m) 4QFY02 4QFY03 Change FY02 FY03 Change
    Net sales 99,930 127,550 27.6% 420,890 458,980 9.0%
    Other Income 2,050 3,260 59.0% 7,820 10,010 28.0%
    Expenditure 80,000 107,370 34.2% 342,130 375,330 9.7%
    Operating profit (EBDIT) 19,930 20,180 1.3% 78,760 83,650 6.2%
    Operating profit margin (%) 19.9% 15.8%   18.7% 18.2%  
    Interest 3,590 3,340 -7.0% 18,250 15,550 -14.8%
    Depreciation 7,390 8,770 18.7% 28,160 28,370 0.7%
    Profit before Tax 11,000 11,330 3.0% 40,170 49,740 23.8%
    Extraordinary income 540 - - 4,120 - -
    Tax 3,190 320 -90.0% 11,860 8,700 -26.6%
    Profit after Tax/(Loss) 8,350 11,010 31.9% 32,430 41,040 26.5%
    Net profit margin (%) 8.4% 8.6%   7.7% 8.9%  
    No. of Shares 1,053.8 1,396.0   1,053.8 1,396.0  
    Diluted earnings per share (Rs)* 31.7 31.5   30.8 29.4  
    P/E ratio (x)         9.4  
    *(annualised)            

    Reliance is the country's largest producer of petrochemical products (polyester filament yarn, polyester staple fibre, polymers and the like) with a market share of 51%. There has been strong topline growth in 4QFY03. This was led by increased realisations, albiet with marginal growth in volumes. The company's performance in the petrochemicals segments has been better as compared with its refining business and was driven by higher realisations.

    For FY03 as a whole, production of oil & gas and petrochemicals increased to 11.8 million tonnes, representing a growth of 3%. Though volume growth in on the lower side, the concentration on speciality products has contributed significantly in terms of value realisation during the course of the year (command a premium of 5%-25% as compared to commodities). Speciality grades contributed to 19% of polymer production, 59% of PSF and 27% of PFY output. On the macro front, the global demand growth is expected to exceed global capacity additions by an estimated 6 MMT over the next three years. This could help improve the global demand supply balance and consequently, the pricing environment. Polymers contribute the largest share to RIL's revenues and the company would benefit from any improvement in the cycle.

    On the refining front, the Jamnagar refinery produced 28.6 million tonnes of crude with capacity utilisation at 106% for FY03 (116% in 4QFY03). Domestic demand for petroleum products showed signs of improvement in FY03 (2% overall rise as compared to a marginal dip last year). Exports however, were on the lower side (down 24% YoY). Following the dismantling of the administered price mechanism, private operators are eligible for setting up marketing presence. Reliance received the approval for the same in May 2002 for setting up over 5,800 outlets. This will benefit the company in the long run.

    Operating margins have declined considerably in 4QFY03, which could be attributed to the escalation of feedstock and key raw material prices in line with the spurt in crude prices. Crude prices rose during the course of the year due to various factors like Venezuelean strike, disruption in production in Nigeria (especially sweet crude) and US led coalition attack on Iraq. To put things in perspective, raw material costs as a percentage of sales increased to 84% in 4QFY03 from 64% in the same period last year (67% in FY02 to 75% in FY03).

    Net profit for FY03 is higher by 27% and was helped by lower interest costs resulting from refinancing some of its high cost debts. The rise in net profit is on the higher side at 45%, if one were to exclude extraordinary income arising out of profit from sale of stake in L&T to Grasim.

    The stock currently trades at Rs 275 implying a P/E multiple of 9.4x FY03 earnings. In FY04, the pressure on margins is expected to reduce when one considers the fact that crude prices have already softened. Fundamentally speaking, as we mentioned earlier, the demand-supply mismatch that was hurting realisation growth in the past is likely to shift favorably in the next two years. This is likely to benefit Reliance in a large way. Amidst all these positives, significant investment in telecom and refining distribution is a worrying aspect, owing to the execution risks involved in the initial years. Reportedly, Reliance Infocomm has managed to add 1 m Wireless in Local Loop (WiLL) subscribers till March 2003. The all India launch of this service is expected in May 2003 and it remains to be seen how the company fares on this front. With cellular players already planning to match Reliance's tariffs on the CDMA front, competition is stiff. This could keep investors at bay.

     

     

    Equitymaster requests your view! Post a comment on "Reliance: 4QFY03 blues". Click here!

      
     

    More Views on News

    Sorry! There are no related views on news for this company/sector.

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working(Vivek Kaul's Diary)

    Aug 21, 2017

    Most Indians who cannot find jobs, look at becoming self-employed.

    It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

    Aug 16, 2017

    The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Think Twice Before You Keep Money In A Savings Bank Account(Outside View)

    Aug 22, 2017

    Post demonetisation, a cut in bank savings deposits rates was in the offing.

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    RELIANCE IND. SHARE PRICE


    Aug 24, 2017 12:48 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. - IOC COMPARISON

    Compare Company With Charts

    COMPARE RELIANCE IND. WITH

    MARKET STATS