Reliance
BUY Industries (RELIND)
CMP: | 2577 Target: | 3050 (18%) Target Period: 12 months BUY
December 23, 2022
Retail: Marches on strongly with its acquisition spree…
About the stock: Reliance Industries (RIL) is one of India’s biggest conglomerates
with a presence in oil refining & marketing and petrochemicals, oil & gas exploration,
Company Update
retail, digital services, media, etc, making it a well-diversified business entity.
Particulars
At the EBITDA level in FY22, O2C and oil & gas contributed 49% while retail, P a rtic ula r Amount
digital and others contributed 10%, 34% and 7%, respectively Market Capitalization (| Crore) 17,43,340.5
Total Debt (FY22) (| Crore) 3,55,258.1
Update: Reliance Retail and Jio to be growth drivers in near to medium term.
Cash (FY22) (| Crore) 36,178.0
Reliance Retail has been one of the fastest, largest growing retailers in EV (| Crore) 20,62,420.6
recent times. In FY18-22, it recorded a staggering 30% revenue CAGR with 52 week H/L 2855/ 2181
sales worth nearly | 2 lakh crore in FY22.The company bolstered its offering Equity capital (FY22) (| Crore) 6,765.0
and continued to fill white spaces through acquisitions and spent nearly Face value (|) 10.0
| 10000 crore in FY22. It’s recent acquisition of Metro Wholesale business
(B2B) for a consideration of | 2850 crore (0.4x EV/sales) would further Shareholding pattern
strengthen its backend supply chain with accelerated growth in JioMart Dec-21 M ar-22 Jun-22 S ep-22
Kirana orders (up 4x YoY) and on-boarding of new HoReCA clients Promoter 50.6 50.7 50.6 50.6
The 5G launch has begun for Jio in the last couple of months and is likely to FII 24.7 24.2 23.9 23.6
reach pan-India by December, 2023. Superior spectrum portfolio along with DII 13.6 14.3 14.7 14.9
superior digital ecosystem offering lends Jio a competitive advantage even Others 11.0 10.9 10.8 10.9
in 5G (as seen in 4G foray). We expect ARPU, EBITDA of Jio to grow at
~12%, ~22%, respectively, over FY22-25E Price Chart
ICICI Securities – Retail Equity Research
3000 20000
Singapore GRMs, which had declined at the start of Q3, have started 2500
15000
improving amid rise in product cracks and are at ~US$9/bbl. This would 2000
1500 10000
likely improve Reliance’s GRMs and its refining segment earnings. The 1000
5000
company announced capex plans worth | 75000 crore in petrochemicals 500
0 0
What should investors do? Long term prospects and dominant standing of RIL in
Dec-19
Dec-20
Dec-21
Dec-22
Jun-20
Jun-21
Jun-22
each of its product & service portfolio provide comfort for long term value creation.
RIL’s consumer business will be the growth driver, going ahead. RIL NIFTY Index
We revise our rating on the stock from HOLD to BUY Recent event & key risks
Target Price and Valuation: We value RIL at | 3050 on an SoTP basis. Key Risk: (i) Lower discretionary
spends owing to higher inflation
Key triggers for future price performance:
can subdue sales (ii) Lower than
Increment value accretion from ‘digital ecosystem’ that will be captured at expected refining margins
the Jio Platforms (JPL) level
Research Analyst
Steady FCF generation in retail segment to enable it to maintain debt at
Bharat Chhoda
lower levels & improve its ability to invest in future inorganic opportunities [email protected]
Alternate Stock Idea: Apart from RIL, in our oil & gas coverage, we also like Gail. Bhupendra Tiwary
Gail is a beneficiary of increasing gas consumption. Stable volume growth [email protected]
along with higher profitability from gas trading, petchem and LPG segment Harshal Mehta
due to higher oil prices will add value [email protected]
Key Financial Summary
5 Yr C AGR 3 Yr C AGR
Key Fina ncia ls FY21 FY22 FY23E FY24E FY25E
(FY17-22) (FY22-24E)
Revenue (| crore) 5,39,238.0 7,92,756.0 19.1 9,59,482.3 9,86,233.9 10,84,852.9 11.0
EBITDA (| crore) 80,737.0 1,10,460.0 19.1 1,35,818.9 1,57,940.2 1,78,732.0 17.4
PAT (| crore) 49,128.0 60,705.0 15.3 64,220.3 79,848.4 91,109.0 14.5
EPS (|) 76.2 89.7 94.9 118.0 134.7
P/E (x) 33.8 28.7 27.1 21.8 19.1
P/BV (x) 2.4 2.2 2.1 1.9 1.7
RoCE (%) 5.5 7.1 8.7 10.3 11.4
RoE (%) 7.0 7.8 7.6 8.7 9.1
Source: Company, ICICI Direct Research
Company Update | Reliance Industries ICICI Direct Research
Exhibit 1: Valuation
Bus iens s s egments V aluation M ethodology V alue (| crore) |/s hare
Energy
Oil to Chemicals ~7x FY24E EBITDA 375126 555
Oil & Gas 6.5x FY24E EBITDA 103755 153
V alue of Energy bus ines s 478881 708
C ons umer Bus ines s
Retail (RIL share) 36x FY24E EBITDA 852577 1260
Digital services (RIL share) DCF 675182 998
V alue of C ons umer bus ines s 1527759 2258
Others 154200 228
Net debt 97220 144
Equity v alue 2063620 3050
Source: Company, ICICI Direct Research
ICICI Securities | Retail Research 2
Company Update | Reliance Industries ICICI Direct Research
Consolidated Financial Summary
Exhibit 2: Profit and loss statement | crore Exhibit 3: Cash flow statement | crore
(Year-end M arch) FY22 FY23E FY24E FY25E (Year-end M arch) FY22 FY23E FY24E FY25E
Revenue 792756. 0 959482. 3 986233. 9 1084852. 9 P rof it af ter Tax 67,845.0 71,936.7 89,747.6 1,02,465.5
Growth (%) 47.0 21.0 2.8 10.0 Add: Depreciation 29,797.0 37,433.1 41,556.8 46,946.0
(Inc.)/Dec. in stock trade 360784.0 445274.1 396082.5 437762.6 Add: Others 12,643.0 5,275.0 5,275.0 5,275.0
Raw material Costs 114128.0 136224.0 164667.2 181269.7 Cash Profit 1,10,285.0 1,14,644.8 1,36,579.4 1,54,686.5
Employee Costs 18775.0 22889.0 24720.2 26697.8 Increase/(Decrease) in CL 13,713.9 1,02,765.3 9,451.9 31,928.7
Excise Duty 92794.0 105009.6 122843.8 134411.8 (Increase)/Decrease in CA 2,857.0 -17,305.1 5,102.5 -6,711.3
Other Expenditure 95815.0 114266.7 119980.0 125979.0 CF f rom Operating Activ ities1, 26, 855. 9 2, 00, 104. 9 1, 51, 133. 8 1, 79, 903. 8
Op. Expenditure 6,82,296.0 8,23,663.4 8,28,293.7 9,06,120.9 Purchase of Fixed Assets 1,62,890.0 38,569.0 60,000.0 70,000.0
EBITDA 110460. 0 135818. 9 157940. 2 178732. 0 (Inc)/Dec in Investments -29,436.0 -15,418.0 -5,000.0 -5,000.0
Growth (%) 36.8 23.0 16.3 13.2 Others 10239 8000 8000 8000
Depreciation 29797.0 37433.1 41556.8 46946.0 CF f rom Inv es ting Activ ities
-1, 82, 087. 0 -45, 987. 0 -57, 000. 0 -67, 000. 0
EBIT 80663.0 98385.8 116383.4 131786.0 Inc/(Dec) in Loan Funds 62,544.1 -70,000.0 -65,000.0 -65,000.0
Interest 14584.0 14851.0 13000.0 12400.0 Inc/(Dec) in Sh. Cap. & Res. 16,880.0 -4,315.4 -9,899.3 -11,356.6
Other Income 15227.0 13521.0 16600.0 17600.0 Dividend Paid 5412 6088.5 6088.5 6088.5
PBT 84142.0 97055.8 119983.4 136986.0 CF f rom f inancing activ ities 74, 012. 1 -80, 403. 9 -80, 987. 8 -82, 445. 1
Growth (%) 51.7 15.3 23.6 14.2 Change in cash Eq. 18,781.0 73,714.1 13,146.1 30,458.8
Tax 16297.0 25119.1 30235.8 34520.5 Op. Cash and cash Eq. 17,397.0 36,178.0 1,09,892.1 1,23,038.1
Minority Interest 7140.0 7716.4 9899.3 11356.6 Cl. Cas h and cas h Eq. 36, 178. 0 1, 09, 892. 1 1, 23, 038. 1 1, 53, 496. 9
Reported P AT 60705. 0 64220. 3 79848. 4 91109. 0 Source: Company, ICICI Direct Research
Growth (%) 23.6 5.8 24.3 14.1
EP S 89. 7 94. 9 118. 0 134. 7
Source: Company, ICICI Direct Research
Exhibit 4: Balance Sheet | crore Exhibit 5: Key ratios
(Year-end M arch) FY22 FY23E FY24E FY25E (Year-end M arch) FY22 FY23E FY24E FY25E
S ource of Funds P er s hare data (|)
Equity Capital 6,765.0 6,765.0 6,765.0 6,765.0 Book Value 1,152.2 1,243.2 1,352.2 1,477.9
Preference Capital 0.0 0.0 0.0 0.0 Cash per share 53.5 162.4 181.9 226.9
Reserves & Surplus 7,72,720.0 8,34,252.8 9,08,012.7 9,93,033.1 EPS 89.7 94.9 118.0 134.7
Shareholder's Fund 7,79,485.0 8,41,017.8 9,14,777.7 9,99,798.1 Cash EPS 133.8 150.3 179.5 204.1
Loan Funds 3,55,258.1 2,85,258.1 2,20,258.1 1,55,258.1 DPS 8.0 9.0 9.0 9.0
Deferred Tax Liability 49,644.0 54,919.0 60,194.0 65,469.0 P rof itability & Operating Ratios
Minority Interest and others 1,09,499.0 1,17,499.0 1,25,499.0 1,33,499.0 EBITDA Margin (%) 13.9 14.2 16.0 16.5
S ource of Funds 12, 93, 886. 1 12, 98, 693. 9 13, 20, 728. 8 13, 54, 024. 2 PAT Margin (%) 8.6 7.5 9.1 9.4
Fixed Asset Turnover (x) 1.0 1.2 1.2 1.3
Application of Funds Inventory Turnover (Days) 49.6 47.0 47.0 47.0
Gross Block 8,92,149.0 9,61,389.0 10,34,389.0 11,07,389.0 Debtor (Days) 10.9 13.0 13.0 13.0
Less: Acc. Depreciation 2,64,351.0 3,01,784.1 3,43,340.9 3,90,286.9 Current Liabilities (Days) 93.0 115.0 115.0 115.0
Net Block 6,27,798.0 6,59,604.9 6,91,048.1 7,17,102.1 Return Ratios (%)
Capital WIP 1,72,506.0 1,41,835.0 1,28,835.0 1,25,835.0 RoE 7.8 7.6 8.7 9.1
Total Fixed Assets 8,00,304.0 8,01,439.9 8,19,883.1 8,42,937.1 RoCE 7.1 8.7 10.3 11.4
Investments 3,94,264.0 4,09,682.0 4,14,682.0 4,19,682.0 RoIC 7.3 9.7 11.5 13.2
Inventories 1,07,778.0 1,23,549.8 1,26,994.5 1,39,693.4 V aluation Ratios (x)
Debtor 23,640.0 34,173.3 35,126.1 38,638.6 PE 28.7 27.1 21.8 19.1
Cash 36,178.0 1,09,892.1 1,23,038.1 1,53,496.9 Price to Book Value 2.2 2.1 1.9 1.7
Loan & Advance, Other CA 1,37,501.0 1,28,501.0 1,19,001.0 1,09,501.0 EV/EBITDA 18.7 14.1 11.7 9.8
Total Current assets 3,05,097.0 3,96,116.2 4,04,159.8 4,41,329.9 EV/Sales 2.6 2.0 1.9 1.6
Current Liabilities 2,01,989.9 3,02,302.6 3,10,731.2 3,41,803.0 L ev erage & S olv ency Ratios
Provisions 3,789.0 6,241.5 7,264.9 8,121.8 Debt to equity (x) 0.5 0.3 0.2 0.2
Total CL and Provisions 2,05,778.9 3,08,544.1 3,17,996.1 3,49,924.8 Interest Coverage (x) 5.5 6.6 9.0 10.6
Net Working Capital 99,318.1 87,572.0 86,163.7 91,405.1 Debt to EBITDA (x) 3.2 2.1 1.4 0.9
Miscellaneous expense 0.0 0.0 0.0 0.0 Current Ratio 1.5 1.3 1.3 1.3
Application of Funds 12, 93, 886. 1 12, 98, 693. 9 13, 20, 728. 8 13, 54, 024. 2 Quick ratio 1.0 0.9 0.9 0.9
Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research
ICICI Securities | Retail Research 3
Company Update | Reliance Industries ICICI Direct Research
Exhibit 6: ICICI Direct coverage universe (Oil & Gas)
CM P TP M Cap EP S (|) P /E (x) EV /EBITDA (x) RoCE (%) RoE (%)
Sector / Company Rating
(|) (|) (| Cr) FY22 FY23EFY24E FY22 FY23E FY24E FY22 FY23E FY24E FY22 FY23E FY24E FY22 FY23E FY24E
BPCL (BHAPET) 335 350 Hold 71,337 42.0 -11.2 55.3 8.0 -29.9 6.1 6.5 30.6 5.0 13.2 -2.2 15.2 17.9 -5.0 21.4
GAIL (India) (GAIL) 93 100 Hold 61,148 23.3 9.9 8.9 4.0 9.4 10.4 3.3 7.4 8.1 18.8 10.3 8.7 18.6 11.1 9.5
Gujarat Gas (GUJGA) 484 545 Hold 33,319 18.9 14.3 27.8 25.6 33.8 17.4 16.3 20.0 11.0 27.3 17.3 28.3 23.3 15.6 24.2
HPCL (HINPET) 232 250 Hold 32,919 44.9 -39.6 47.8 5.2 -5.9 4.9 7.8 -18.2 6.6 7.3 -9.9 8.3 16.5 -17.0 18.3
Indian Oil Corp (INDOIL) 77 85 Hold 1,08,734 17.1 2.8 14.0 4.5 27.1 5.5 2.5 5.8 2.6 12.9 2.4 10.1 18.4 3.2 14.9
Indraprastha Gas (INDGAS) 381 430 Hold 26,670 18.8 21.7 20.9 20.3 17.6 18.3 13.5 11.5 10.8 22.3 22.5 20.2 19.0 18.8 16.1
Mahanagar Gas (MAHGAS) 897 1,000 Hold 8,860 60.4 50.4 79.6 14.8 17.8 11.3 9.2 10.6 6.9 19.8 15.1 22.2 16.6 13.1 18.4
ONGC (ONGC) 124 135 Hold 1,59,133 8.9 32.0 41.1 13.9 3.9 3.0 5.4 2.8 1.9 4.5 14.8 22.1 5.5 17.0 18.9
Petronet LNG (PETLNG) 212 215 Hold 31,800 22.3 18.2 19.4 9.5 11.6 11.0 5.8 6.9 6.2 27.0 20.5 20.9 25.0 19.4 19.5
Reliance Industries (RELIND) 2,577 3,050 Buy 17,43,341 89.7 89.7 94.9 33.8 28.7 27.1 24.0 18.7 14.1 5.5 7.1 8.7 7.0 7.8 7.6
Source: Bloomberg, ICICI Direct Research
ICICI Securities | Retail Research 4
Company Update | Reliance Industries ICICI Direct Research
RATING RATIONALE
ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according -to their notional target price vs. current market price and then categorizes them as Buy, Hold,
Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined
as the analysts' valuation for a stock
Buy: >15%
Hold: -5% to 15%;
Reduce: -15% to -5%;
Sell: <-15%
ICICI Direct Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
[email protected]ICICI Securities | Retail Research 5
Company Update | Reliance Industries ICICI Direct Research
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I/We, Bharat Chhoda, MBA, Bhupendra Tiwary, MBA, Harshal Mehta, MTech (Biotech), Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views
expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly
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mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.
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ICICI Securities | Retail Research 6
