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: And the 'story' continues - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jul 27, 2004

    Reliance: And the 'story' continues

    Introduction to results
    Reliance Industries has declared its 1QFY05 results today. The performance can be attributed largely to the uptrend in the petrochemicals cycle and firm petroleum product prices, which have resulted in high refining margins.

    (Rs m) 1QFY04 1QFY05 Change
    Net sales 125,010 142,800 14.2%
    Other income 1,870 3,470 85.6%
    Expenditure 102,130 114,750 12.4%
    Operating profit (EBDITA) 22,880 28,050 22.6%
    Operating profit margin (%) 18.3% 19.6%  
    Interest 3,490 4,680 34.1%
    Depreciation 7,000 9,160 30.9%
    Profit before tax 14,260 17,680 24.0%
    Tax 2,460 3,310 34.6%
    Extraordinary items 760 -  
    Profit after tax/(loss) 11,040 14,370 30.2%
    Net profit margin (%) 8.8% 10.1%  
    No. of shares (m) 1,396.0 1,396.0  
    Diluted earnings per share (Rs)* 31.6 41.2  
    P/E ratio (x)   11.4  
    (* annualised)      

    What is the company's business?
    Reliance Industries has a presence in the entire hydrocarbons value chain ranging from upstream (exploration and production), downstream (refining and marketing), petrochemicals and textiles businesses. A further segmental breakup shows that the petrochemicals business contributes nearly 39% of the EBIT margins while refining contributes nearly 49%. The exploration business contributes nearly 12%, while the balance is contributed by the textiles business. Going forward, we believe the share of upstream business is likely to increase.

    What has driven performance in 1QFY05?
    Sales: The topline growth of 14% YoY is a combination of improved volumes and better realizations. Continuing uptrend in the petrochemicals cycle coupled with high petroleum product prices have resulted in better realizations for the company. We believe this uptrend in the petrochemicals cycle is likely to continue for another year and the company's venture into marketing of petrol and diesel would add to the margins, going forward.

    Expenditure break-up
    (%) of sales 1QFY04 1QFY05
    Raw materials consumed 70.5% 68.0%
    Staff cost 1.3% 1.2%
    Other expenditure 9.9% 11.1%

    Operating margins: Margins have improved by 130 basis points largely being a trickle down effect of robust prices and also the fact that expenditure has not increased proportionately in comparison to revenues. The company has been successful in controlling its raw materials cost which account for nearly 70% of the total expenditure. However, the operating profits could have been better but for the rise in other expenditure.

    Net profit: The bottomline has improved by an impressive 30% YoY despite a 34% rise in interest expenditure and 31% rise in depreciation on account of revaluation of plant and machinery. This growth can be attributed to the extraordinary expenditure (VRS) that the company has accounted for during the 1QFY04.

    Over the last four quarters: The company has posted steady growth in bottomline over the last four quarters. The growth in operating profit is lower during the last quarter due to an increase in raw materials expenditure. However, it is to be noted that although operating profits peaked during 4QFY04, sales during the period dipped. Better refining margins was the key reason behind the same.

    What to expect?
    The stock is currently trading at a P/E multiple of 11x 1QFY05 annualised earnings. Going forward, we believe the company shall ride high on exploration business, which begins commercial operations in FY06. Also the uptrend in the petrochemicals cycle is likely to continue for another year. Also, with the acquisition of a German polyester firm, Reliance has become the largest polyester manufacturer in the world and this acquisition augurs well for the company as it marks the company's entry into the European markets. However, the marketing business remains a worry as the company might witness competition from the assets rich PSUs in the business.



    Equitymaster requests your view! Post a comment on "Reliance: And the 'story' continues". Click here!


    More Views on News

    GAIL: A Good Show (Quarterly Results Update - Detailed)

    Mar 27, 2017

    GAIL (India) Ltd has announced results for the quarter ended December 2016. reported 9.4% year on year (YoY) decline in sales, while bottom-line grew 45.4% YoY.

    ONGC: Higher Realisations on Crude Support Performance (Quarterly Results Update - Detailed)

    Mar 17, 2017

    ONGC has announced results for the quarter ended December 2016. The company has reported 9.2 % year on year (YoY) growth in sales, while bottom-line grew 197% YoY.

    Mahanagar Gas Ltd (IPO)

    Jun 21, 2016

    Should one subscribe to Mahanagar Gas IPO?

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    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


    Aug 21, 2017 03:37 PM


    • 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


    Compare Company With Charts