Reliance Industries CAPEX surged on 66.6% and Revenue surged on 11.5%

24-04-2017 • About Reliance Industries ($RELIANCE) • By InTwits

Reliance Industries reported FY2017 financial results today. Here are the key drivers of the company's long term financial model:

Reliance Industries has high CAPEX intensity: 5 year average CAPEX/Revenue was 16.2%.
The company has business model with low profitability: ROIC is 7.5%
It operates with high leverage: Net Debt/EBITDA is 4.2x while industry average is 4.0x

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue surged on 11.5%. During FY2013-FY2017 Revenue growth bottomed in FY2016 at -27.0%. EBITDA Margin showed almost no change in FY2017. EBITDA Margin grew at 2.1 pp per annum in the last 5 years.

Net Income margin decreased slightly on 1.1 pp from 10.9% to 9.8% in FY2017. Net Income margin followed a growing trend at 1.5 pp per annum in FY2013-FY2017.

Investments (CAPEX, working capital and M&A)

Reliance Industries's CAPEX/Revenue was 25.6% in FY2017. CAPEX/Revenue jumped on 11.7 pp from 13.8% in FY2014 to 25.6% in FY2017. Average CAPEX/Revenue for the last three years was 19.9%. The company has spent a lot to CAPEX (169% of EBITDA) to fuel its growth. CAPEX as a % of Revenue grew at 3.9 pp per annum in the last 5 years.

Return on investment

The company operates at good ROE (12.1%) while ROIC is low (7.5%). ROIC showed almost no change in FY2017. ROE decreased slightly on 1.1 pp from 13.2% to 12.1% in FY2017. During the last 5 years ROIC bottomed in FY2015 at 7.0% and was growing since that time.

Leverage (Debt)

Company's Net Debt / EBITDA is 4.2x and Debt / EBITDA is 4.3x. Net Debt / EBITDA surged on 0.1x from 4.1x to 4.2x in FY2017. Debt increased on 8.8% while cash dropped on 72.6%. Net Debt/EBITDA stuck to a growing trend at 0.5x per annum in FY2013-FY2017.

Reliance Industries has short term refinancing risk: cash is only 6.8% of short term debt.

Financial and operational results

FY ended 31-03-2017

Reliance Industries ($RELIANCE) key annual financial indicators

mln. INR	2013	2014	2015	2016	2017	2017/2016
P&L
Revenue	3,970,620	4,344,600	3,754,350	2,739,990	3,053,820	11.5%
EBITDA	329,880	350,300	376,010	417,040	461,940	10.8%
Net Income	208,790	224,930	235,660	297,450	299,010	0.5%
Balance Sheet
Cash	372,670	379,090	125,200	110,280	30,230	-72.6%
Short Term Debt	362,590	377,420	400,860	390,180	444,510	13.9%
Long Term Debt	709,600	1,010,160	1,207,770	1,416,470	1,521,480	7.4%
Cash flow
Capex	307,260	600,870	633,640	468,980	781,090	66.6%
Ratios
Revenue growth	10.8%	9.4%	-13.6%	-27.0%	11.5%
EBITDA growth	-5.1%	6.2%	7.3%	10.9%	10.8%

EBITDA Margin	8.3%	8.1%	10.0%	15.2%	15.1%	-0.1%
Net Income Margin	5.3%	5.2%	6.3%	10.9%	9.8%	-1.1%
CAPEX, % of revenue	7.7%	13.8%	16.9%	17.1%	25.6%	8.5%

ROIC	7.6%	7.3%	7.0%	7.2%	7.5%	0.3%
ROE	11.9%	11.8%	11.3%	13.2%	12.1%	-1.1%
Net Debt/EBITDA	2.1x	2.9x	3.9x	4.1x	4.2x	0.1x

Peers in Integrated Oil & Gas

Below you can find Reliance Industries benchmarking vs. other companies in Integrated Oil & Gas industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top	FY2013	FY2014	FY2015	FY2016	FY2017
Deep Industries ($DEEPIND)	8.0%	39.1%	11.5%	67.0%	-
Essar Oil ($ESSAROIL)	51.8%	11.3%	-15.8%	-37.0%	-
Median (2 companies)	29.9%	25.2%	-2.1%	15.0%	-
Reliance Industries ($RELIANCE)	-	9.4%	-13.6%	-27.0%	11.5%

Top companies by EBITDA margin, %


Top	FY2013	FY2014	FY2015	FY2016	FY2017
Deep Industries ($DEEPIND)	55.5%	57.8%	54.5%	57.7%	-
Essar Oil ($ESSAROIL)	4.2%	5.1%	5.7%	11.2%	-
Median (2 companies)	29.8%	31.5%	30.1%	34.4%	-
Reliance Industries ($RELIANCE)	8.3%	8.1%	10.0%	15.2%	15.1%

Top companies by CAPEX/Revenue, %


Top	FY2013	FY2014	FY2015	FY2016	FY2017
Deep Industries ($DEEPIND)	27.8%	66.1%	36.1%	119.3%	-
Essar Oil ($ESSAROIL)	2.5%	1.4%	0.9%	1.5%	-
Median (2 companies)	15.1%	33.7%	18.5%	60.4%	-
Reliance Industries ($RELIANCE)	7.7%	13.8%	16.9%	17.1%	25.6%

Top companies by ROIC, %


Top	FY2013	FY2014	FY2015	FY2016	FY2017
Deep Industries ($DEEPIND)	9.5%	13.1%	12.3%	16.5%	-
Essar Oil ($ESSAROIL)	9.9%	14.6%	14.2%	12.1%	-
Median (2 companies)	9.7%	13.9%	13.3%	14.3%	-
Reliance Industries ($RELIANCE)	7.6%	7.3%	7.0%	7.2%	7.5%

Top companies by Net Debt / EBITDA


Top	FY2013	FY2014	FY2015	FY2016	FY2017
Essar Oil ($ESSAROIL)	6.6x	3.9x	5.7x	5.1x	-
Deep Industries ($DEEPIND)	2.4x	2.1x	2.1x	2.7x	-
Median (2 companies)	4.5x	3.0x	3.9x	3.9x	-
Reliance Industries ($RELIANCE)	2.1x	2.9x	3.9x	4.1x	4.2x

Reliance Industries stock price chart

Reliance Industries financials

mln.	FY2010	FY2011	FY2012

Revenue	2,037,397	2,658,106	3,585,010
EBITDA	301,683	377,955	347,630
Net income	245,031	192,937	197,240
CAPEX	232,781	338,650	163,810
Debt	646,055	841,520	924,470
Cash	138,908	155,280	338,400

About Reliance Industries

Reliance Industries Limited, together with its subsidiaries, is engaged in the exploration, development, and production of crude oil and natural gas in India and internationally. It operates through three segments: Petrochemicals, Refining, and Oil and Gas. The Petrochemicals segment produces and markets petrochemical products, such as high and low density polyethylene, polypropylene, polyvinyl chloride, poly butadiene rubber, polyester yarn, polyester fibre, purified terephthalic acid, paraxylene, ethylene glycol, olefins, aromatics, linear alkyl benzene, butadiene, acrylonitrile, caustic soda, and polyethylene terephthalate. The Refining segment is involved in the production and marketing of petroleum products. The Oil and Gas segment is engaged in the exploration, development, and production of crude oil and natural gas. The company also offers textile products, including suitings, shirtings, jackets, trousers, and readymade garments; and ready-to-stitch and take away fabrics. In addition, it operates retail outlets comprising Reliance retail, food and grocery specialty stores, hypermarkets, and wholesale stores; electronic, digital technology, jewelry, apparel, footwear, toys, and optical specialty stores; furniture, furnishing, and homeware specialty stores; and automotive services and products specialty stores. Further, the company is engaged in the retail of transportation fuels, auto LPG, petroleum, and lubricant products, as well as offers fleet management services and highway hospitality services. The company is also involved in SEZ development and telecom/broadband businesses. The company was formerly known as Reliance Textile Industries Limited and changed its name to Reliance Industries Limited in June 1985. Reliance Industries Limited was incorporated in 1973 and is based in Mumbai, India.