201801券商二Value drivers intactreiterating Buy

1、Deutsche BankMarkets ResearchRatingBuyAsiaIndiaDate17 January 2018CompanyReliance IndustriesForecast ChangePrice at 15 Jan 2018 (INR)946.00Reuters RELI.BOBloomberg RIL INExchange BSETicker RELIEnergyOil & GasPrice target - 12mth (INR)1,150.0052-week range (INR)953.05 - 504.28Bombay Stock Exchange34,

2、592Value drivers intact, reiterating Buy(BSE 30)Harshad KatkarResearch Analyst (+91) 22 7180-4029Revised target price implies 24% upside potentialReliance Industries (RIL) stock is up 39% YTD FY18, outperforming the BSE Sensex by 22%. After this sharp outperformance, investors ar

3、e now asking if all the improvement is already in the price. We do not believe so. We think the Street still has not fully factored in the impact of a sharp increase in the revenue market-share in telecom, the launch of fiber broadband in FY19 and the potential upside to RILs refining margins. The s

4、tock factors in no equity value for RILs stake in the telecom venture, vs. our equity value of INR 206/sh. RIL remains the most under-owned among Sensex stocks for Indian Mutual Funds and the seventh most under-owned among MSCI India stocks for FIIs.End of the capex cycle, FCF to improve from negati

5、ve to 5.3% over FY17-20e With the completion of the largest capex cycle in its history, RIL should generate FCF of over USD 5bn annually from FY20. Over FY17-20e, we expect RILs EBITDA to register a CAGR of 29% vs. the anemic EBITDA CAGR of 3% over FY11-17. With the commissioning of this capex, petr

6、ochemicals should annually add as much as USD 1.6bn to EBITDA (23% of FY17), whilst petcoke gasification & refining should add as much as USD1.1bn to EBITDA (16% of FY17).Jio: Raising equity value to INR 206/sh (+10%); fixed broadband is next catalyst With about USD 30bn (30% of market cap) invested

7、 in telecom (RJIO), RJIOs market-share growth continues to drive a significant proportion of the value creation opportunity for RIL shareholders. The next major catalyst should be the launch of fiber broadband, likely in mid-FY19E. It will fully leverage Jios investment in fiber and content and aid

8、revenue-share gains in the mobile market. Our current forecasts imply 23% mobile revenue-share and 10mn fiber subs by FY21E. This would support FY21E revenue of INR 664bn (USD 10bn) and EBITDA of INR 336bn (USD 5bn). The two key milestones for Jio in 2017 were the move from free-to-pay and the launc

9、h of its 4G feature phone. Jio has fundamentally altered consumer behavior in the Indian telecom sector it moved the SKU from voice-to-data bundles and its consumers to a fully digital channel via in-app offers and couponing.Srinivas Rao, CFAResearch Analyst (+65 ) 6423 4114Key change

10、sTP1,040.00 to 1,150.0010.6%Source: Deutsche BankPrice/price relative10509007506004503001/167/161/177/17Reliance IndustriesBombay Stock Exchang (Rebased)Performance (%)1m3m12mAbsolute0.35.672.8Bombay Stock Exchange (BSE 30)4.16.827.7Raising TP by 11% to INR 1,150We have raised FY19/20e earnings by 4

11、-5% and our TP by 11% to INR 1,150 as we align petrochem spread assumptions to DB regional forecasts, benchmark RelianceForecasts And RatiosYear End Mar 312016A2017A2018E2019E2020ERetails valuation to peers and factor in a2,739,990.0 3,053,820.0 3,852,201.6 4,570,799.0 4,786,549.0 higher revenue mar

12、ket-share for RJIO. WeSales (INRm)417,040.0 461,940.0 682,900.3 914,040.7 987,896.2EBITDA (INRm)value RIL on SOTP, with refining and petrochem on 7.5x Mar19 EV/EBITDA, Retail on EV/sales, and E&P and telecom on DCF. Risks are 1) lower downstream margins; and 2) an unsuccessful telecom launch (please

13、 see page 20 for details).252,870.0299,010.0348,608.2430,136.6457,482.7DB Net Profit (INR)39.0546.1453.7966.3770.59DB EPS FD(INR)39.0546.1453.5763.7667.09OLD DB EPS FD(INR)0.0%0.0%0.4%4.1%5.2% Change23.46.4DB EPS growth (%)11.911.317.213.913.1PER (x)11.311.5EV/EBITDA (x)1 DB EPS

14、 is fully diluted and excludes non-recurring items2 Multiples and yields calculations use average historical prices for past years and spot prices for current and future years, except P/B whichDeutsche Bank AG/Hong KongDistributed on: 16/01/2018 18:33:38 GMTDeutsche Bank does and seeks to do busines

15、s with companies covered in its research reports. Thus, investors shouldbe aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST

16、CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 083/04/2017.7T2se3r0Ot6kwoPaSource: Deutsche Bank estimates, company dataSource: Deutsche Bank淘寶店鋪“Vivian研報(bào)” 首次收集整理告及后續(xù)更新服務(wù)請(qǐng)?jiān)谔詫毸阉鞯赇?“Vivian研報(bào)”獲取最或直接用手機(jī)淘寶掃描下方二維碼17 January 2018 Oil & GasReliance IndustriesModel updated:15 January 2018Fiscal year end 3

17、1-Mar2015201620172018E2019E2020ERunning the numbersAsia IndiaFinancial SummaryDB EPS (INR)Reported EPS (INR) DPS (INR)BVPS (INR)Weighted average shares (m) Average market cap (INRm) Enterprise value (INRm)36.4436.445.00336.36,4683,012,1394,586,22939.0546.115.25357.36,4763,011,7824,715,54246.1446.145

18、.50406.96,4813,374,9185,311,48853.7953.796.50453.66,4815,988,2158,712,49266.3766.377.00512.36,4815,988,2158,460,89670.5970.597.00575.26,4815,988,2158,084,557Oil & GasReliance IndustriesReuters: RELI.BOBloomberg: RIL INValuation MetricsP/E (DB) (x)P/E (Reported) (x) P/BV (x)FCF Yield (%) Dividend Yie

19、ld (%)12.812.81.19nm 1.111.910.11.45nm 1.111.311.31.61nm 2.04nm 0.713.913.91.803.70.815.40.8BuyPrice (15 Jan 18)INR 946.00Target PriceINR 1,150.00 52 Week rangeINR 504.28 - 953.05 EV/Sales (x) EV/EBITDA (x) EV/EBIT (x)1.212.317.81.711.315.61.711.515.42.312.8

20、12.6Market Cap (m)INRm 5,988,215USDm 94,317Income Statement (INRm)Sales revenue Gross profit EBITDADepreciation Amortisation EBITNet interest income(expense) Associates/affiliates Exceptionals/extraordinaries Other pre-tax income/(expense) Profit before taxIncome tax expense MinoritiesOther post-tax

21、 income/(expense) Net profitDB adjustments (including dilution) DB Net profitCompany ProfileRIL is Indias largest3,754,350813,890373,640115,4700258,170-33,1601,180084,950311,14074,7407400235,6600235,6602,739,990851,850417,040115,6500301,390-36,9102,36045,74074,790387,37088,76000298,610-45,740252,870

22、3,053,820930,820461,940116,4600345,480-38,490-1,080094,430400,3401020100299,0103,852,2021,407,216682,900181,7070501,193-75,2990051,712477,606128,954440348,6080348,6084,570,7991,750,707914,041297,1840616,856-97,6960078,836597,996167,4394200430,1370430,1374,786,5491,899,979987,896346,3670

23、641,530-107,02500103,440637,945178,6251,8380457,4830457,483private sector enterprise, withbusinesses in the energy and materials value chain. Its activities span exploration and production of oil and gas, petroleum refining and marketing, petrochemicals (polyester, fibre intermediates, plastics and

24、chemicals), textiles and retailing. At 1.3m bpd, RIL operates the largest refinery in the world at a single location. RIL is also the largest polyester yarn and fibre producer in the world and among the top five to ten producers globally in major petrochemical products.Price Performance1050900750600

25、450300Cash Flow (INRm)Cash flow from operations Net CapexFree cash flowEquity raised/(bought back) Dividends paidNet inc/(dec) in borrowingsOther investing/financing cash flows Net cash flowChange in working capital343,740-629,620-285,8802,260-32,680175,040-19,360-160,62018,150381,340-465,540-84,200

26、2,830-72,590169,8407,256,9807,272,86078,290495,500-766,270-270,7706,920-530131,8606,650,9506,518,430154,630-103,073-690,238-793,3110-46,107831,33251,71243,626-594,506586,233-363,820222,4130-49,654-229,77778,83621,819-78,113703,465-380,913322,5530-49,654-156,102103,440220,237-1,025Jan 16Apr 16Jul 16O

27、ct 16Jan 17Apr 17Jul 17Oct 17 Reliance IndustriesBombay Stock Exchange (BSE 30) (Rebased)Margin Trends2420161284Balance Sheet (INRm)Cash and other liquid assets Tangible fixed assets Goodwill/intangible assets Associates/investments Other assetsTotal assetsInterest bearing debt Other liabilitiesTota

28、l liabilities Shareholders equity MinoritiesTotal shareholders equityNet debt125,4503,176,75043,970764,510925,7005,036,3801,699,5401,129,9502,829,4902,176,51030,3802,206,8901,574,090110,2804,093,53042,540840,150903,4705,989,9701,814,0401,826,8103,640,8502,315,56033,5602,349,1201,703,76030,2305,184,7

29、1048,920783,9001,020,2607,068,0201,966,8002,434,9604,401,7602,637,09029,1702,666,2601,936,57073,8565,693,24148,920783,9001,002,9517,602,8682,798,1321,835,9304,634,0622,939,59129,2142,968,8062,724,27695,6745,759,87748,920783,9001,060,7727,749,1432,568,3551,831,0784,399,4333,320,07429,6353,349,7092,47

30、2,681315,9125,794,42348,920783,9001,064,3548,007,5082,412,2531,835,8794,248,1323,727,90431,4723,759,3762,096,34215161718E19EEBIT Margin20EEBITDA MarginGrowth & Profitability3020100-10-20-30151050Key Company MetricsSales growth (%) DB EPS growth (%) EBITDA Margin (%) EBIT Margin (%) Payout ratio (%)

31、ROE (%)Capex/sales (%) Capex/depreciation (x) Net debt/equity (%) Net interest cover (x)Source: Company data, Deutsche Bank estimates15161718E19E20E-13.64.710.06.913.711.316.95.571.37.8-27.011.413.38.211.511.972.69.026.116.617.713.012.112.517.93.891.86.71

32、8.723.420.013.510.513.78.01.26.420.613.49.913.08.0Sales growth (LHS)ROE (RHS)Solvency100806040200108642015161718E19E20ENet debt/equity (LHS)Net interest cover (RHS)Harshad Katkar+91 22 7180-4029Page 2Deutsche Bank AG/Hong Kong17 January 2018 Oil & GasReliance

33、IndustriesExecutive SummaryMajor capex over, let the cashflow beginSince FY13, RIL has undertaken a significant capex-led growth program under which it has already invested over USD 50bn on key projects that include telecoms (over USD 30bn) and refining & petrochemicals (c.USD 20bn). It is already t

34、he largest capex program in RILs corporate history. Most of these projects have now been commissioned. We estimate RILs capex at INR 703bn in FY18, lower than the FY17 capex of INR 1,147bn (USD 17.1bn). We expect capex to decline further to INR 381bn (USD 5.9bn) in FY20.Figure 1: Capex to decline fr

35、om FY198007006005004003002001000FY15FY16FY17FY18EFY19EFY20ECapex (INR bn)Source: Company data, Deutsche BankNew capacities, higher margins to drive strong EBITDA growthWe forecast RILs EBITDA to grow 45% over FY18-20e (vs. only a 3% CAGR over FY11-17), driven by the commissioning of new capacities i

36、n petrochemicals and refining (petcoke gasifier), and improving margins. While RJIO has been EBITDA positive in 2QFY18, it should gain critical mass in FY19. We estimate RJIO to achieve EBITDA of USD 3bn by FY20. The refinery off gas cracker (ROGC) has ramped up and is now operating at full capacity

37、. We estimate this alone to add c.USD1.2bn annually (or 17%) to RILs EBITDA from FY19, with ethane imports contributing another USD 0.3-0.4bn. Petcoke gasification should also add c.USD 1.1bn (or 16%) annually to RILs EBITDA. We expect the Petchem businesss EBITDA to grow 42% over FY17-19e to INR 31

38、1bn, whereas we expect the refining EBITDA to increase by 32% to INR 376bn. We forecast the Digital services segment (RJIO) to contribute 15% to RILs consolidated EBITDA in FY19.Figure 2: RILs EBITDA to grow 45%over FY18-20e10009008007006005004003002001000FY15FY16FY17FY18EFY19EFY20ERIL consolidated

39、EBITDA (INR bn)Source: Company data, Deutsche BankWith capex over, FCF yield to rise to over 5% by FY20RILs capex during FY17 reached INR 1,147bn (USD 17.1bn). We expect FY18 to be the last year in the current cycle of RILs intensive capital investment program as most of the new capacities have been

40、 commissioned and have ramped up. For the period FY14-17, RIL reported negative free cash due to higher capex across business segments. We expect RILs free cash to improve and become positive from FY19. We expect FCF yield to also improve to 3.6% in FY19 and 5.3% FY20.Figure 3: FCF to turn positive

41、fromFY192000-200-400-600-800-1000FY15FY16FY17FY18EFY19EFY20EFCF (INR bn)Source: Company data, Deutsche BankDeutsche Bank AG/Hong KongPage 317 January 2018 Oil & GasReliance IndustriesJio to reach 23% wireless revenue market-share by FY21, fixed broadband isnext catalystThe two key milestones for Jio

42、 in 2017 were the move from free-to-pay and launch of its 4G feature phone. Jio has fundamentally altered the consumer behavior in the Indian telecom sector it moved the SKU from voice-to-data bundles and its consumers to a fully digital channel via in-app offers and couponing. We believe the next c

43、atalyst will be the launch of fiber broadband, likely in mid-FY19E. It will fully leverage Jios investment in fiber and content and aid rev-share gains in the mobile market. Our current forecasts imply 23.3% mobile rev-share and 10mn fiber subs by FY21E. This would support FY21E revenue and EBITDA o

44、f INR 664bn and INR 336bn. We value Jio at an Enterprise Value of USD 42bn, implying an EV/IC of 1.2x, a 30% discount to Bharti Airtel.Figure 4:shareJio mobile revenue market25.0%20.0%15.0%10.0%5.0%0.0%FY18EFY19EFY20EFY21EMobile revenue mkt shr %Source: Deutsche BankRIL remains one of the most under

45、-owned stocks in the NiftyAnalysis of aggregate institutional ownership by the DB India Strategy team Abhay Laijawala and Bijay Kumarsuggests RIL is under-owned in domestic mutual funds and also FII portfolios as per the latest quarterly reporting. Despite the stock outperformance over the last 12 m

46、onths, RIL remains the most under-owned among Nifty stocks for Indian Mutual Funds and the seventh most under-owned among MSCI India stocks for FIIs.Figure 5: RIL is the most under-owned among Niftystocks in Mutual FundsFigure 6: RIL is one of the most under-owned stocksamong MSCI India in FIIs port

47、foliosBHARTI INFRATEL LTD KOTAK MAHINDRA BANK LTDBAJAJ AUTO LTD INDIABULLS HOUSING FINANCE LASIAN PAINTS LTD HINDUSTAN UNILEVER LTD TATA CONSULTANCY SVCS LTDITC LTDHINDUSTAN PETROLEUM CORPBAJAJ FINSERV LTD LARSEN & TOUBRO LTD RELIANCE INDUSTRIES LTDWIPRO LTD VEDANTA LTDSUN PHARMACEUTICAL INDUSHINDUS

48、TAN UNILEVER LTDHOUSING DEVELOPMENT FINANCETATA MOTORS LTDRELIANCE INDUSTRIES LTDINFOSYS LTD-4.5% -4.0% -3.5% -3.0% -2.5% -2.0% -1.5% -1.0% -0.5% 0.0%-1.4% -1.2% -1.0% -0.8% -0.6% -0.4% -0.2% 0.0%Series1Series1Source: Company fillings, Deutsche BankSource: Company filings, Deutsche BankValuations le

49、ave scope for upsideRILs stock is up 39% YTD FY18, outperforming BSE O&G by 20% and BSE Sensex by 22%. Our exhaustive deep-dive suggests that as: 1) revenue market- share in telecom rises towards 23% by FY21e, 2) fiber broadband is launched by RJIO in FY19, 3) petcoke gasifiers are commissioned by 1

50、QFY19, 4) EBITDA posts a 29% CAGR over FY17-20e from capacity expansions and marginFigure 7: Historical P/E vs SensexP/E353025improvement, and 5) FCF yield moves from negative to 5.3% in FY20,stock should continue to outperform.the2015105RIL is currently trading at FY19 EV/BITDA of 9.4x, which is a

51、10% discount toits last five-year average. Moreover, the current stock price factors in no equity value for RILs stake in the telecom venture, vs. our equity value of INR 206/sh. Even at our NAV, RJIO would be at an EV/IC of only 1.2x, a discount of c.30% to Bharti Airtels EV/IC. We value RIL on SOT

52、P with a target price of INR0 P/ 1-yr fwd EPS Sensex 1 year forward P/ESource: Bloomberg Finance LP, Deutsche BankPage 4Deutsche Bank AG/Hong Kong17 January 2018 Oil & GasReliance Industries1,150/sh with c.24% upside. RIL is currently trading at FY19 P/E of 14.3x, a20% discount to Sensex one-year forward P/E, as compared to the 10-year average discount of 7%.RIL is under-owned in domestic MF and FII portfoliosAnalysis of aggregate institutional ownership by the DB India Strategy teamAbhay Laijawala and Bijay Kumarsuggests RIL is under-owned in