We reiterate a ‘buy’ rating on Reliance Industries and raise our target price to Rs 1,064 (earlier R1,020). We continue to like RIL, led by Ebitda CAGR of over 20% over FY15-17e driven by high returns from this capex, growth in shale gas and cyclical improvement in chemicals/refining.
RIL’s Q4 FY14 PAT of R5,630 crore (up 2.2% sequentially) was lower than estimated R5,670 crore due to lower other income which offset higher operating income from refining and petchem segments.
While the KG-D6 gas production at 14 mmscmd rose sequentially, the Tapti gas production continued to fall. RIL expects KG-D6 production to recover to ~15mmscmd over the next quarter end as it has hooked the MA-08 well. The management remained unclear and non-committal on the implementation of gas prices, though they continue to remain positive on gas price implementation. Shale gas continued high growth with production increasing 2.8% sequentially to 13.6 mmscmd. Shale ebitda rose to $199 million ($174 million in Q3FY14). Retail ebitda was R920 million (2.5% margin versus 0.7% in FY13 and 2.7% in Q3FY14).remains positive.
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Gross refining margins (GRMs), at $9.3 per barrel, were up 22.4% sequentially due to improvement in gasoline cracks. Refining ebit was up 25.9% q-o-q and 12.3% y-o-y. Refining throughput at 17.0 mmt was flat sequentially. Petchem ebitda margin rose to $109 per mt from $101 per barrel in Q3 FY14. Lower petchem volumes impacted ebit.