IDFC

RIL (Buy)

CMP: ₹996.50

Target: ₹1,148

RIL reported a 6 per cent y-o-y growth in standalone PAT to ₹5,650 crore (estimate of ₹5,440 crore). Consolidated earnings (reported for the first time quarterly) were at ₹5,960 crore, growth of 14 per cent y-o-y, led by US Shale and retail turnaround. Refining margins at $8.7/bbl marginally beat estimate of $8.6/bbl, driving EBIT of ₹3,770 crore (+28 per cent y-o-y, 3 per cent above estimate). RIL remains on track to reverse the last three years track record of stagnant earnings and moderating return ratios over FY15-17E, via the $12 billion downstream expansion and improving regulatory environment. The downstream expansion underpins a around 14 per cent CAGR in consol EBITDA over FY14-16E, while higher gas price for upstream could reinvigorate the segment, providing more upside potential. Key negatives: KG D6 uptick some time away, weak Petchem demand growth.