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: Refined play - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Oct 16, 2003

    Reliance: Refined play

    Reliance Industries Limited has announced its September quarter results reporting 10% and 26% growth in its topline and bottomline, respectively. Operating margins also improved by about 70 basis points. The key reasons for the improvement in topline and operating margins can be attributed to the increased selling prices of its products and stability in feedstock prices, respectively.

    (Rs m) 2QFY03 2QFY04 Change 1HFY03 1HFY04 Change
    Net sales 115,190 126,930 10.2% 221,690 251,940 13.6%
    Other Income 2,040 2,510 23.0% 4,050 4,380 8.1%
    Expenditure 93,660 102,310 9.2% 179,640 204,440 13.8%
    Operating Profit (EBDITA) 21,530 24,620 14.4% 42,050 47,500 13.0%
    Operating Profit Margin (%) 18.7% 19.4%   19.0% 18.9%  
    Interest 4,130 3,510 -15.0% 8,200 7,000 -14.6%
    Depreciation 6,570 7,780 18.4% 13,030 14,780 13.4%
    Profit before Tax 12,870 15,840 23.1% 24,870 30,100 21.0%
    Tax 2,850 2,900 1.8% 5,670 5,360 -5.5%
    Extraordinary expenses - 310   - 1,070  
    Profit after Tax/(Loss) 10,020 12,630 26.0% 19,200 23,670 23.3%
    Net profit margin (%) 8.7% 10.0%   8.7% 9.4%  
    No. of Shares 1,396.0 1,396.0   1,396.0 1,396.0  
    Diluted Earnings per share* 28.7 36.2   27.5 33.9  
    P/E Ratio   13.3     14.2  
    *(annualised)            

    Another factor contributing to the improvement in operating margins was the relatively control over operating expenditure. Just to put things in perspective, raw material expenditure as a percentage of net sales came down to 68% in 2QFY04 from 72% in the corresponding period last year. Similarly, staff costs were kept under check at 1.3% of net sales. However, the other expenditure component, which grew 23% in absolute terms, was a dampener for the operating margins. Lower interest costs also contributed to the 26% rise in bottomline.

    For the half-year ended September 2003, the bottomline improved by 23% on the back of a 14% improvement in topline. It must be noted that during the first half of the current fiscal, the company managed to increase its exports by 41% and this is despite the rupee appreciation. However, operating margins during this period have fallen by a marginal 10 basis points, which is primarily due to a fall in the realisations in the petrochemicals segment during 1QFY04.

    It must be noted that it is the firm refining margins that have been playing an important role in protecting the bottomline of the company. In contrast to 1QFY04, the margins of the petrochemicals segment have stabilised. The effect of lower product prices during the June quarter has affected the margins of the segment for the first half of the current fiscal. However, with product prices now stabilising and realisations improving, its contribution towards the second half could be expected to improve. On the refining front, while it has managed to outperform the petrochemicals segment in terms of growth and PBIT margins, the scenario may get reversed going forward if the petroleum product prices sustain at the current levels.

    The other income of the company, which increased by 8% in 1HFY04, mainly consists of interest and dividend income. Interest income also fell 15% YoY on the back of refinancing efforts by the company of its high-cost long-term debts. It must be noted that the company, as part of a restructuring exercise, had offered VRS to its employees. The extra-ordinary charge of over Rs 1 bn is due to the fact that around 1,700 people opted for the same. The capex figure for the company in the first half of FY04 stood at Rs 23 bn.

    At Rs 482, the stock is trading at a P/E multiple of 14.2x its annualised 1HFY04 earnings. The petrochemical cycle is on an upturn and this apart, the natural gas discovery promises lot of potential for the company going forward. The company has plans to increase its petrochemicals capacity by about 10% and this will further help it capitalize from the cyclical upturn. Its entry in the marketing of petroleum products will further help it realize the benefits of integration. 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. Also, the shareholding structure between various new initiatives is complex. This increases the risk profile of the stock significantly from a retail investor perspective.

     

     

    Equitymaster requests your view! Post a comment on "Reliance: Refined play". Click here!

      
     

    More Views on News

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

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    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.

    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.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    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 18, 2017 (Close)

    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. - CONOCOPHILLIPS COMPARISON

    Compare Company With Charts

    COMPARE RELIANCE IND. WITH

    MARKET STATS