Reliance Results came in today, and as things go, they seem to be a) better than expected and b) not so brilliant in the scheme of things. I know people like to base things on “expectations” but because they are largely figments of imagination I tend to disbelieve them and care only about the actually growth numbers.
Profits and revenues are higher than ever, with profits finally surpassing the high made in September 2011. The Dip in June 2013 (of profits) has made profit growth look really good, though the TTM EPS growth is abysmal at 6%. (TTM EPS is 71.8)
The Oil and Gas domestic situation continues to be lousy, with the trend looking down in every area; Panna-Mukta crude production did show a marginal improvement, though.
On the Refining front revenues went up 7%, but EBIDTA was up nearly 30% because of very high utilization and a better gross refining margin:
Petrochem margins contracted a bit, to 1863 cr. on a record revenue of 25,400 cr.
What confuses me is the debt situation. After announcing last quarter that their debt was only 89,000 cr. suddenly the debt of RIL as an entity has gone up hugely to 135,000 cr. in Jun 2014. This could be because of the new Companies Act which requires consolidation even at lower levels of ownership. They do say in this release that the debt at the end of FY 2014 (March 2014) was around the 135,000 cr. level.
This changes a lot of the valuation exercise – from a near debt-free company, RIL’s cash levels have fallen, and debt ballooned to a net debt of over 54,000 cr.!
This is kinda incongruent with their interest paid out – of only Rs. 505 cr. in the quarter. That means a real debt cost of just 1.4% per year? Sounds very strange.
They have other businesses too, so here’s the low-down
The stock is an interesting position. It shows signs of bottoming out after a heady rise this year. If the MACD shifts into positive territory this might be a first technical trigger for the stock (will need confirmation), and immediate move should target 1060. It’s also retraced 50% of its move up.
However, we would wait for a trigger for a rerating – at this point, it looks technically weak and might need to break out of the downtrend before a proper entry.
Disclosure: No positions.