Buy Reliance Industries; target of Rs 1638: Nalanda Securities

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Nalanda Securities' research report on Reliance Industries

The company’s net sales grew 18.6% y-o-y and declined by 11.3% q-o-q to INR 1386590 million in Q4FY19. EBITDA grew by 12.7% y-o-y and declined by 2.3% q-o-q to INR 208320 million in Q4FY19. EBITDA Margins stood at 15.0% in Q4FY19 as against 15.8% in Q4FY18 and 13.6% in Q3FY19. Employee expense grew by 35.2% y-o-y to INR 33450 million owing to expansion of petrochemical unit, newly installed ROGC refinery and increase in retail branches. Finance cost grew by 90.8% y-o-y & 18.8% q-o-q to INR 48950 million in Q4FY19. PBT grew by 4.5% y-o-y & declined by 4.1% q-o-q to INR 138570 million in Q4FY19. Reported PAT grew 10.1% y-o-y and marginally by 0.5% q-o-q to INR 104270 million in Q4FY19. PAT margins stood at 7.5% in Q4FY19 as compared to 8.1% in Q4FY18 and 6.6% in Q3FY19.

Outlook

We value the company using SOTP valuation, thereby, valuing refining & petchem business at 7.0x FY21E EBITDA & telecom at 7.0x FY21E EBIDTA to arrive at a target price of INR 1638/share indicating 18.2% upside. We strongly recommend to add the stock on dips with an investment horizon of 1 year.

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