Reliance Industries Ltd (RIL) has declared a topline growth in excess of 70% in back to back quarters. The increase in turnover is due to both volume as well as realisations.
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Production volume for the first half of FY01 grew by 35% to 5.3 m tonnes. The realisations in all its major businesses have increased. Sales growth (excluding merchant sales) has grown by 48% in 1HFY01. The topline by was driven by 25% volume growth and 23% realisation growth. The stupendous rise in expenditure indicates feedstock prices have increased substantially.
Operating profits are up a healthy 38%. However, all is not hunky-dory, OPM has fallen by 400 basis points. The bullishness in oil markets have taken its toll on the petrochemical behemoth. Margins are down even quarter on quarter and recovery will depend on cooling of naphtha prices. Oil markets are expected to remain firm in 3QFY01 with the onset of winter months. Consequently, downstream product prices will subside only with a lagged effect.
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. It also plans to consolidate the balance sheet of Bombay Suburban Electricity Supply (BSES) at a later date. This should further boost the bottomline of RIL.
The management has reiterated its intention to augment promoter holding. The buyback price is Rs 303 and it will be carried out through open market purchases.
Historically, RIL has traded at a three year average P/E multiple of 12.8. Currently, it is trading at a multiple of 10.9 on 2QFY01 annualised earnings.
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