Reliance Industries
BSE SENSEX
28,423
S&P CNX
8,775
1 September 2016
Update | Sector: Oil & Gas
CMP: INR1,029
TP: INR1,129(+10%)
Jio tariffs + mass trial offerings announced
Neutral
Targeting 100m subscribers soon; early trends to dictate long-term
outlook
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
RIL IN
3,234.0
3,327.8 / 49.7
1090 / 825
0/-13/12
3785
54.9
Financials & Valuations (INR b)
Y/E Mar
Net Sales
EBITDA
PAT
EPS (INR)
Gr. (%)
BV/Sh (INR)
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
EV/EBITDA(x)
2016
2,332
401.4
274.2
93.6
20.7
818.4
12.0
11.1
12.2
1.3
8.5
2017E
2,706
475.5
313.3
105.6
14.3
12.4
11.9
10.8
1.1
6.9
2018E
3,118
567.0
356.4
120.1
13.7
12.6
12.6
9.5
1.0
6.0
Reliance Industries’ (RIL) CMD Mukesh Ambani announced the much-awaited
details on its telecom venture Jio in terms of tariffs and likely commercial launch
dates at its AGM.
RIL will offer Jio services on complementary basis from September 5 till December
31, 2016, implying commercial launch in January 2017.
On the commissioning of on-track core projects, petcoke gasification will complete
in 1HCY17 versus earlier expectation of 2HFY17.
RIL’s strategy to move away from cyclical commodity earnings to annuity-like
businesses will play out in coming years as it tries to profitably scale its telecom and
retail businesses. RIL’s FY17 earnings will be function of GRM trend, while telecom
launch and its success will drive the stock price movement.
Telecom tariffs announced; core projects largely on track
898.5 1,001.1
Shareholding pattern (%)
As on
Mar-16 Dec-15 Mar-15
Promoter
DII
FII
Others
45.2
12.8
22.5
19.5
45.2
13.2
21.9
19.7
45.2
12.6
22.0
20.2
Mass-scale trial offering from September 5:
RIL will launch the Jio Welcome
Offer on September 5, 2016, wherein users will have access to unlimited LTE
data and national voice, video and messaging services free of cost till
December 31, 2016. LYF brand handsets will be available from INR2,999. Plans
will begin from INR19/day and will have tariff of INR25-50/GB, depending on
usage. RIL will charge only for data usage and not voice.
Targeting 100m subscribers soon:
RIL targets to reach 100m customers at
fastest pace.
Core projects largely on track:
RIL’s USD18.5b core projects after some delays
(not alarming against the backdrop of scale/complexity) are set to commission
fully by 1HCY17.
We believe that RJio’s welcome offer of free data and voice over the next four
months should lead to a significant shift in traffic away from incumbents
(driven by 2
nd
SIM phenomenon). However, commercial offerings post Dec-16
could potentially alter the competitive dynamics in the telecom industry.
We expect RJio’s subscriber base to reach 75m by FY19E (75% of
management’s 100m target with ARPU of INR 244). With these workings, we
expect RJio to break even in the third year at EBITDA level.
RIL’s recent capital allocation had been skewed toward non-core businesses to
ring-fence its earnings from cyclical businesses. Now with non-core forming
40% of CE, successful consummation of core capex and telecom venture is
critical.
On FY18E basis, the stock trades at 9.3x adj. SA EPS of INR120 and EV/EBITDA
of 5.9x.
Neutral.
Our (telecom analyst) view on Jio (Link to detailed note on telecom)
FII Includes depository receipts
Stock Performance (1-year)
Reliance Inds.
Sensex - Rebased
1,100
1,000
900
800
700
Valuations and view
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Harshad Borawake
(HarshadBorawake@MotilalOswal.com); +91 22 6129 1529
Abhinil Dahiwale
(Abhinil.Dahiwale@motilaloswal.com); +91 22 3980 4309