Reliance Industries (RIL’s) Q3FY09 net profit at Rs35 billion was down 10% y-o-y, but higher than consensus and our estimates.
Profits beat estimates due to better-than-expected margins and higher-than-estimated ‘other income’, on the back of interest income from the money infused through warrant conversion.
RIL’s Q3 GRM was $10/bbl, a premium of $6.4 to the Singapore complex benchmark. (We had estimated $8.) We are surprised by the higher reported margin, despite a falling commodity price environment.
Unlike other refiners, RIL does not report inventory gains/losses separately. Given the sharp correction in commodity prices in Q3 there could have been inventory losses.
The petrochemicals EBIT margin was down to 13.1% compared to 14% in 3QFY08, but the EBIT performance was better than our expectation. The key reason was better-than-expected sales volume (+10% q-o-q) in the quarter. RIL attributes the same to de-stocking of inventory.
E&P recorded a strong EBIT growth of 56% with its share of EBIT growing from 8% to 15% y-o-y. Higher sales and price realization from the natural gas businesses contributed to the higher EBIT.
We increase our FY09e EPS by 4% to Rs102, while maintaining FY10e and FY11e estimates. Ahead, E&P (D6) and refining (RPL) volume growth would be key earnings drivers, as margins could be subdued.