Views on RIL Results

Reliance Industries' Q4 FY09 net profit was down by 1% at Rs 3,874 crore as compared to Rs 3,912 crore in the same period last year. Q4 turnover was down 24% at Rs 28,362 crore as against Rs 37,286 crore year-on-year.
Commenting on the company's numbers, Amitabh Chakraborty, President (Equity), Religare Capital Markets, said the numbers came in as a surprise as they were expecting above Rs 3,600 crore profit figure. He said USD 12-10 GRM is largely inline with Religare's numbers but slightly above market numbers. According to him, the about 14% margin on the petchem side is primarily because of the product mix, which is quite healthy.
Deepak Pareek, Research Analyst, Angel Broking, said Q4 numbers were inline with their estimates. "We had anticipated a profitability of Rs 3,787 crore for the company before any sort of extraordinary item."
SP Tulsian of sptulsian.com said the increase in bottomline to Rs 3,874 crore has come in as a surprise. He attributes this to the sharp increase in other income by about Rs 700 crore.
Deven Choksey of KR Choksey Securities too shares Tulsian's view that the increase in bottomline could be due to the rise in other income. "At the end of Q3, they had a surplus of about Rs 28,600 crore. From that, we were expecting other income in excess of Rs 700 crore. This figure is due to smart management of money and can even be around Rs 1,000 crore. The advance tax numbers have also contributed to a higher bottomline."
However, Rohit Nagraj, Research Analyst, Prabhudas Liladher, feels the surprise has come in from the petrochemicals segment. "Other income has come close to about Rs 993 crore, so the performance is somewhat mirrored to what was delivered in the third quarter."
On gross refining margins:
Choksey feels gross refining margins of USD 9.9 per barrel is slightly lower than expectations. "If you look at January-February Singapore GRMs it was USD 6.6 per barrel and in March it was around USD 4 per barrel. That gives an average of about USD 5.5 per barrel."
Pareek had anticipated refining margins of USD 10.5 per barrel, which have come slightly lower than their expectations. "The shortfall is largely fulfilled by a higher than expected petrochemical margins."
FY10 estimates:
Tulsian estimates an average production of 40 million cubic metre per day from the KG Basin. "By March 2010 production should rise to about 80 million. Taking an average production of 40 million cubic metre, the estimated turnover from KG Basin could be Rs 11,750 crore. This profit will be tax-free and could contribute about Rs 6,000-6,250 crore to the bottomline."
According to Tulsian, the estimated profit for FY10 is about Rs 23,000-24,000 crore which translates into an EPS of Rs 141-144. "I have also taken into account a slight drop in profitability because of increase in tax liability, since the Reliance refinery, which all along has been an export-oriented unit, has lost its EOU status. The tax liability could increase by about Rs 800-1,000 crore for RIL on its existing operations."
Pareek estimates an EPS of around Rs 130.9 based on FY10 bottomline.
How will the stock trade going forward?
Tulsian sees the stock touching Rs 2,100 in the next six months. "As production progresses from KG Basin and as we come to know about the performance of the new refinery it will definitely re-rate the stock. So, it can take a target of Rs 2,100."