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RIL: Margins under pressure

Oct 31, 2001

Reliance Industries Ltd. (RIL) is set to declare second quarter and half-yearly results for fiscal '02 this evening. We expect the company to report a marginal growth in topline not including merchant sales while post-tax profits are expected to be lower by 12%.

(Rs m) 2QFY01 2QFY02** Change
Sales 67,200 68,544 2.0%
Merchant sales 16,740 -  
Total sales 83,940 68,544 -18.3%
Other Income 760 780 2.6%
Expenditure 70,620 56,343 -20.2%
Operating Profit (EBDIT) 13,320 12,201 -8.4%
Operating Profit Margin (%) 15.9% 17.8%  
Interest 3,330 3,084 -7.4%
Depreciation 3,400 3,427 0.8%
Profit before Tax 7,350 6,469 -12.0%
Tax - -  
Profit after Tax/(Loss) 7,350 6,469 -12.0%
Net profit margin (%) 8.8% 9.4%  
No. of Shares (eoy) 1,054 1,054  
Diluted Earnings per share* 27.9 24.6  
P/E Ratio   10.1  
*annualised ** expectations      

Realisations on key products of the company have come under pressure over the quarter ended September '01 as compared to the previous year. Except for POY, PET and LAB, company prices have fallen across the board by 8%-20%. There seems to be more downside risk in topline growth. That said, the company has reported utilisation levels of 104% for 1HFY02. Production, YoY, is higher by an estimated 8.6%. Consequently, drop in realisations could be compensated through higher volume sales.

At Rs 249 the RIL scrip is trading on a multiple of 10.1x 2QFY02 annualised earnings.


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