Please refer to page 38 for important disclosures and analyst certification, or on our website www.macquarie.com/research/disclosures. INDIA RIL IN Underperform Price (at 15:23, 24 Jul 2017 GMT) Rs1,615.00 Valuation Rs 1,340.00 - DCF (WACC 9.0%, beta 0.9, ERP 6.9%, RFR 2.5%, TGR 4.0%) 12-month target Rs 1,350.00 12-month TSR % -15.7 GICS sector Energy Market cap Rsbn 5,252 Market cap US$m 80,048 Free float % 47 30-day avg turnover US$m 297 Number shares on issue m 3,252 Investment fundamentals Year end 31 Mar 2017A 2018E 2019E 2020E EBITDA bn 461.9 559.8 618.5 691.3 EBITDA growth % 10.7 21.2 10.5 11.8 EBIT bn 345.5 358.3 393.6 431.2 EBIT growth % 14.6 3.7 9.8 9.6 Reported profit bn 299.0 288.8 297.7 326.5 Adjusted profit bn 299.0 278.0 297.7 326.5 CFPS Rs 140.80 162.47 177.09 198.79 CFPS growth % 12.9 15.4 9.0 12.3 PGCFPS x 11.5 9.9 9.1 8.1 EPS rep Rs 101.33 97.88 100.87 110.66 EPS adj Rs 101.33 94.19 100.87 110.66 EPS adj growth % 18.6 -7.0 7.1 9.7 PER adj x 15.9 17.1 16.0 14.6 Total DPS Rs 11.00 12.00 13.00 14.00 Total div yield % 0.7 0.7 0.8 0.9 ROA % 5.3 5.0 5.3 5.8 ROE % 11.9 9.8 9.5 9.8 EV/EBITDA x 14.2 11.7 10.6 9.5 Net debt/equity % 67.8 56.2 56.5 54.4 P/BV x 1.8 1.6 1.5 1.4 Also see: India Refining & Marketing – Who says elephants can’t dance? Global Refining – Expansions outweighed by demand Analyst(s) Aditya Suresh, CFA +852 3922 1265 [email protected]25 July 2017 Macquarie Capital Limited Reliance Industries Defying gravity? We resume coverage of Reliance Industries (RIL) with an Underperform recommendation and Rs.1350 one-year price target with 15% potential downside. To justify today’s share price, in addition to the growth from RIL’s new refining and petchem projects and a constructive refining margin view, we need to ascribe US$12 billion option value for JIO (burgeoning telecom business)—with not a single $ of revenue booked we consider this optionality premature. “Growth is life” In-sync with RIL’s motto, EBITDA has grown 1.4x over the past five years and is set to increase 1.9x over the next five years underpinned by the ramp-up of several new projects—refinery petcoke gasification, off-gas cracker, paraxylene capacity addition, ethane imports, retail expansion, and JIO (page 10-30). This EBITDA growth is however fully captured in consensus estimates in our view. FCF and returns to improve… but underwhelm While RIL is transitioning this year from the funding to harvest phase for its refining and petchem projects, in our opinion consensus cash capex estimates for FY18-20e are light by 35%. We attribute this difference to JIO, R-series deepwater gas, and repayment of vendor financing. For FY18-20e we project an average 1% FCF yield and 9% ROCE versus consensus at 5%-12%. Amazon-esque optionality? RIL shares have de-coupled from the historically strong returns versus multiple framework as the market has been willing to price the optionality for JIO (fig 1). To the extent valuing JIO akin to Amazon or Alibaba is appropriate and if we apply 5x EV-Sales on FY5 estimates then the optionality on offer is a significant US$23 billion or Rs.500/sh above our base case. For perspective this would be equivalent to the size of India’s largest telecom incumbent. We ascribe c.Rs.90/sh value for JIO in our base case valuation (fig 3). Our Rs.1350 price target implies 9.0x FY19E EV-EBITDA, 13.5x P/E, and 1.3x P/B. For downstream exposure our top pick is Indian Oil (IOCL IN, TP: Rs.550, +45%). Fig 1 Rs.1350 RIL fundamental base case with 15% downside; current share price already implies meaningful option value for JIO Source: Company data, Macquarie Research, July 2017 800 1,100 1,400 1,700 2,000 Rs/sh Reliance 3-Year Bull-Bear Outcomes Current price
40
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Please refer to page 38 for important disclosures and analyst certification, or on our website
Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period.
Source: FactSet, Macquarie Research, July 2017
(all figures in INR unless noted)
Company Profile
Reliance Industries (RIL) is India’s largest
listed conglomerate with operations in
refining, petrochemicals, telecoms,
upstream oil and gas, organized retail,
media, etc. Refining and petrochemicals
combined account for over 90% of group
EBITDA today. The contribution of RIL’s
burgeoning telecom business could rise to
one-fifth of group EBITDA in five years,
from zero today, we estimate.
Reliance – In a page Fig 2 Core growth and JIO optionality already in the price
Source: Company data, Macquarie Research, July 2017
0
400
800
1200
1600 Rs/sh
Macquarie Research Reliance Industries
25 July 2017 3
Base Valuation & Bull-Bear Outcomes Fig 3 Rs.1350 one-year price target for Reliance based on a sum-of-the-parts valuation and supported with residual income valuation work. Our target price implies 9.0x FY19e EV-EBITDA, 13.5x P/E, and 1.3x P/B. Target also supported by residual income valuation (p. 35)
Notes:
Net debt does not include vendor financing and other current liabilities equivalent to Rs380/sh as we consider this akin to accounts payable. We treat RIL’s short-term investments (Rs180/sh) equivalent to cash.
Fig 4 Wide bear-bull range; bull case largely rests on JIO being a success
Bull Case:
Amazon-esque optionality for JIO assumes 5x EV-Sales on FY5 estimates
Bull Refining Margin +$2 per barrel versus base case – RIL $16.0/bbl, Singapore benchmark $9.0/bbl
Bear Case:
$5.0/bbl Singapore benchmark refining margin
20% contraction in integrated petchem margins
30% lower revenue versus base case assuming 500bps lower market share
Source: Company data, Macquarie Research, July 2017
RIL SOTP Valuation Approach
FY18-20e
Reference
(INR, bn)
Target
Multiple
Base
Value
(US$, bn)
Base
Value
(INR/sh)
Refining and Marketing EV-EBITDA 311 7.0x 33.5 738 10% premium to EM R&M median
Petrochemicals EV-EBITDA 245 7.0x 26.4 582 Target at EM petchem median
Organized Retail EV-EBITDA 21 15.0x 4.8 105 India retail comps used
Oil and Gas EV-DACF 13 4.0x 0.8 17 Disc to EM upstream median
Others (ex JIO) EV-EBITDA 6 10.0x 0.9 20 Assumed similar to group multiple
LT Investments Fair Value (reported) 3.8 84 At reported fair value
Net Debt, ex JIO End-FY17, ex JIO -12.3 -271 Also includes ST investments
RIL Core Equity Value 1,275
EV-Invested Capital 1,817 0.7x 19.6 431 Discount to IC as ROIC<Ke
EV-EBITDA (FY3) 94 7.5x 8.1 178 EM median multiple on FY3 est.
EV-Sales (FY3) 344 2.3x 9.1 201 Softbank used as comps
Asset Book Value 2,043 0.5x 15.7 346
Residual Income 14.0 309 ROCE<Ke across forecast period
JIO Core Enterprise Value 13.3 293 Average of above approaches
Optionality ∆ EV-Sales (FY5) 762 5.0x 22.8 503
Net Debt, JIO standalone End-FY17 -9.3 -206
RIL JIO Equity Value, ex optionality 87 Used in MacQ base case
RIL JIO Equity Value, including optionality 590 For reference only
Treasury shares 292mn Rs.1600 6.4 141 Pet Trust & holding by subsids
Conglomerate Discount 10% -150
RIL Equity Valuation, ex JIO optionality 1,353 MacQ base case
RIL Equity Valuation, including JIO optionality and no conglomerate discount 1,866 For reference only
Net income breakeven FY22+
Amazon, FB, Alibaba multiples
Comments
800
1,100
1,400
1,700
2,000Reliance 3-Year Bull-Bear Outcomes
Current price
Macquarie Research Reliance Industries
25 July 2017 4
Versus Consensus EBITDA inline for FY18, downside for FY19-20e
We expect RIL consolidated EBITDA to increase 21%/10%/12% y/y in FY18/19/20e, inline
for FY18, but 12% below for FY19-20e. Our key modelling assumptions include:
Refining & Marketing – constructive product crack outlook and opex savings from
petcoke gasification project partly offset by tighter light-heavy crude spreads. We assume
RIL restarts 300 stations/pa but the impact on consolidated EBITDA is less than 1%, on
our estimates.
Petchems – Three new projects add to segment earnings from FY18: (1) Refinery off-gas
EBIT 20% below for FY19-20e; JIO amortization a key uncertainty
Our forecast EBITDA growth is diluted to 10%/3%/10% y/y EBIT growth for FY18/19/20e. The
main drag is the significant amortization headwind for JIO (charges capitalized till date).
Against consensus our EBIT estimate is mildly ahead for FY18 but 20% below for FY19-20e.
Fig 6 EBIT growth outlook materially suppressed by JIO amortization headwind
Source: FactSet, Company data, Macquarie Research, July 2017. Estimates from FY18.
Free Cash Flow to disappoint – disconnect in headlines versus cash movements
While RIL reported US$17.7 billion capex for FY17 the actual cash outflow was 32% lower
due to vendor financing. Similarly cash capex in FY15-16 was 37%-58% below reported
capex. On a cumulative basis we estimate a US$11 billion cash flow drag in the next five
years due to capex timing differences over the past five years. As such while headline capex
reported by RIL peaked in FY17 and will be meaningfully lower from this year, we do not
expect a commensurate improvement in free cash flow, even with customer advances for
JioPhone. Our base case implies an average 1% FCF yield over the next three years versus
consensus forecast 5% FCF yield.
Fig 7 FCF to improve but underwhelm – consensus capex 35% light; repayment of vendor financing a drag
Source: Company data, Macquarie Research, July 2017. Estimates from FY18.
Mere 1% FCF yield
FY18-20e
Macquarie Research Reliance Industries
25 July 2017 6
Reported returns to improve but underwhelm; cash return outlook better
Our base case modelling implies return on capital employed (ROCE) for RIL remains
essentially around 9-10% in our forecast horizon. That said, we note that on a cash basis,
adjusting for depreciation and amortization expenses (JIO a big incremental drag), returns
improve to 18% by FY20e from 14% in FY17.
Fig 8 JIO a drag on returns… only a mild improvement in returns on completion of expansion projects
Source: FactSet, Company data, Macquarie Research, July 2017. Estimates from FY18. Consensus estimates for non-covered companies
Multiples have decoupled from fundamentals
RIL shares have de-coupled from the historically strong returns versus multiple framework as
the market has been willing to price the optionality for JIO (fig 9). To the extent this optionality
doesn’t play out the downside for RIL’s returns-justified multiple is material c.30%, albeit not
in our base case.
Fig 9 Reliance trading multiples supported by fund flows, JIO optionality and not entirely by fundamentals
Source: FactSet, Company data, Macquarie Research, July 2017. Estimates from FY18.
No meaningful
improvement in
ROCE
Macquarie Research Reliance Industries
25 July 2017 7
Fig 10 EV-EBITDA versus ROIC: Premium multiple for core (ex JIO) priced in; including JIO, Reliance in special-sit territory due to potential optionality
Source: Company data, FactSet, Macquarie Research, July 2017. Consensus estimates for non-covered companies.
Rs.1950 bull-case: potentially meaningful optionality but likely premature?
In our base case we model revenues for JIO with the mindset of a burgeoning telecom
company structurally taking share from the incumbents. To the extent our reference should
not be telecoms and instead the likes of Amazon or Alibaba then the upside to our revenue
modelling is potentially significant. If this were the case valuing JIO on EV-Sales several
years out perhaps is more appropriate – if we apply 5x EV-Sales on FY5 estimates then the
option value on offer is a significant US$23 billion or Rs.500/sh. For perspective this would be
equivalent to the size of India’s largest telecom incumbent.
Fig 11 To the extent JIO should be viewed as Amazon then the upside to revenue and multiples is significant
Source: Company data, FactSet, Macquarie Research, July 2017
0
5
10
15
20
0 2 4 6 8 10 12 14 16 18 20
US$, billion
Year
India Telcos Revenue Profile
Bharti (T1: '02) Idea (T1: '06)
JIO (T1: '18) RCom (T1: '07)
0
30
60
90
120
150
0 2 4 6 8 10 12 14 16 18 20
US$, billion
Year
Revenue: JIO versus Amazon, Alibaba
JIO (T1: '18) Amazon (T1: '97)
Alibaba (T1: '12)
JIO = Amazon or
Alibaba? Rs.1950
bull-case
Ma
cq
ua
rie R
es
ea
rch
R
elia
nce
Ind
ustrie
s
25
Ju
ly 2
017
8
Fig 12 Reliance Comparables Valuation
Source: FactSet, Company data, Macquarie Research, July 2017. Shares priced on 21-July. Consensus data used for stocks not rated (NR) by Macquarie.
imports, (5) organized retail floor space additions, and (6) JIO. At the EBIT line growth is
diluted to 10%/3%/10% for FY18/19/20e due to the amortization headwind for JIO once the
operations are deemed commercial.
Fig 13 1.9x EBITDA expansion in next five years; Refining and petchems contribution to group EBITDA still dominant at c.85%, EBIT contribution at 110% in FY20e
Source: Company data, Macquarie Research, July 2017
Fig 14 Despite good EBITDA growth, amortization expenses for JIO a near-term headwind to RIL’s EBIT outlook
Source: Company data, FactSet, Macquarie Research, July 2017
Source: Company data, Macquarie Research, July 2017. PX – Paraxylene, LDPE – Linear Density Polyethylene, LLDPE - Linear Low Density Polyethylene, MEG – Monoethylene Glycol, Syngas – Synthetic natural gas,
In Fig 21 we show the standalone impact of RIL’s petcoke regasification project. See
Petrochemicals section for impact of Off-Gas Cracker and PX projects.
Key project considerations:
Input(s): Petcoke produced from refinery, petcoke/low-grade coal sourced externally (65:35
feed blend flexibility), oxygen (from the air separation units).
Output(s): Syngas for use in power generation or further processed to yield hydrogen,
synthetic natural gas (SNG, via methanation of syngas), methanol, ammonia, acetic acid.
Long-run per ton economics: LNG gross cost saving (US$370/ton) + syngas for process
heaters (US$340/ton) versus petcoke cost US$95/ton (tied to MacQ coal price forecast,
$130 syngas equivalent) and opex US$35/ton. Blended project EBITDA ~US$190/ton.
Implications
Reported refining GRM increases by US$1.0/1.6/2.5 in FY18/19/long-term. We note
this estimate is about 20% lower versus estimates at the start of 2017 due to higher
domestic petcoke prices.
Group EBITDA increases by US$500/780/1200 million in FY18/19/LT or +7%-17% versus
FY17a.
Fig 20 Petcoke Gasification Project Sensitivities
Source: Company data, Macquarie Research, July 2017
Note: March financial year end. FY18 refers to period between April-2017 and March-2018.
Rs.1,350
0
400
800
1200
1600 Rs/sh
Macquarie Research Reliance Industries
25 July 2017 36
Macquarie Quant View
The quant model currently holds a neutral view on Reliance Industries. The
strongest style exposure is Price Momentum, indicating this stock has had
strong medium to long term returns which often persist into the future. The
weakest style exposure is Profitability, indicating this stock is not efficiently
converting investments to earnings; proxied by ratios like ROE or ROA.
Displays where the
company’s ranked based on
the fundamental consensus
Price Target and
Macquarie’s Quantitative
Alpha model.
Two rankings: Local market
(India) and Global sector
(Energy)
198/599 Global rank in
Energy
% of BUY recommendations 59% (22/37)
Number of Price Target downgrades 0
Number of Price Target upgrades 2
Macquarie Alpha Model ranking Factors driving the Alpha Model
A list of comparable companies and their Macquarie Alpha model score
(higher is better).
For the comparable firms this chart shows the key underlying styles and their
contribution to the current overall Alpha score.
Macquarie Earnings Sentiment Indicator Drivers of Stock Return
The Macquarie Sentiment Indicator is an enhanced earnings revisions
signal that favours analysts who have more timely and higher conviction
revisions. Current score shown below.
Breakdown of 1 year total return (local currency) into returns from dividends, changes
in forward earnings estimates and the resulting change in earnings multiple.
What drove this Company in the last 5 years How it looks on the Alpha model
Which factor score has had the greatest correlation with the company’s
returns over the last 5 years.
A more granular view of the underlying style scores that drive the alpha (higher is
better) and the percentile rank relative to the sector and market.
Source (all charts): FactSet, Thomson Reuters, and Macquarie Research. For more details on the Macquarie Alpha model or for more customised analysis and screens, please contact the Macquarie Global Quantitative/Custom Products Group ([email protected])
Fu
nd
am
en
tals
Quant
Local market rank Global sector rank
Attractive
0.0
1.1
1.4
1.7
1.8
2.2
2.4
-3.0 -2.0 -1.0 0.0 1.0 2.0 3.0
Reliance Industries
Thai Oil
S-Oil
Bharat Petroleum
SK Innovation
Indian Oil
Hindustan Petroleum
-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100%
Reliance Industries
Thai Oil
S-Oil
Bharat Petroleum
SK Innovation
Indian Oil
Hindustan Petroleum
Valuations Growth Profitability Earnings
Momentum
Price
Momentum
Quality
0.2
0.9
-0.1
0.0
0.6
0.9
0.8
-3.0 -2.0 -1.0 0.0 1.0 2.0 3.0
Reliance Industries
Thai Oil
S-Oil
Bharat Petroleum
SK Innovation
Indian Oil
Hindustan Petroleum
-90% -40% 10% 60%
Reliance Industries
Thai Oil
S-Oil
Bharat Petroleum
SK Innovation
Indian Oil
Hindustan Petroleum
Dividend Return Multiple Return Earnings Outlook 1Yr Total Return
Revenue m 928,890 905,370 874,296 920,968 Revenue m 3,301,800 3,608,226 3,635,662 4,043,392 Gross Profit m 251,920 253,410 260,048 279,744 Gross Profit m 930,820 1,085,632 1,170,612 1,271,029 Cost of Goods Sold m 676,970 651,960 614,248 641,224 Cost of Goods Sold m 2,370,980 2,522,594 2,465,050 2,772,363 EBITDA m 122,430 125,540 138,179 146,083 EBITDA m 461,940 559,793 618,481 691,291
Depreciation m 33,540 19,500 60,550 60,550 Depreciation m 116,460 201,470 224,917 260,087 Amortisation of Goodwill m 0 0 0 0 Amortisation of Goodwill m 0 0 0 0 Other Amortisation m 0 0 0 0 Other Amortisation m 0 0 0 0 EBIT m 88,890 106,040 77,628 85,532 EBIT m 345,480 358,323 393,565 431,204
Net Interest Income m -5,410 -11,190 -13,776 -13,776 Net Interest Income m -38,490 -55,103 -73,470 -83,470 Associates m 0 0 0 0 Associates m 0 0 0 0 Exceptionals m 0 10,870 0 0 Exceptionals m 0 10,870 0 0 Forex Gains / Losses m 0 0 0 0 Forex Gains / Losses m 0 0 0 0 Other Pre-Tax Income m 19,310 10,510 18,927 18,927 Other Pre-Tax Income m 93,350 64,979 75,529 86,279 Pre-Tax Profit m 102,790 116,230 82,780 90,684 Pre-Tax Profit m 400,340 379,069 395,624 434,013 Tax Expense m -21,930 -25,440 -20,695 -22,671 Tax Expense m -102,010 -91,150 -98,906 -108,503 Net Profit m 80,860 90,790 62,085 68,013 Net Profit m 298,330 287,920 296,718 325,510 Minority Interests m -100 290 198 217 Minority Interests m 680 920 948 1,040
Reported Earnings m 80,760 91,080 62,283 68,230 Reported Earnings m 299,010 288,839 297,666 326,549 Adjusted Earnings m 80,760 80,210 62,283 68,230 Adjusted Earnings m 299,010 277,969 297,666 326,549
Profit and Loss Ratios 2017A 2018E 2019E 2020E Cashflow Analysis 2017A 2018E 2019E 2020E
Revenue Growth % 12.5 9.3 0.8 11.2 EBITDA m 461,940 559,793 618,481 691,291 EBITDA Growth % 10.7 21.2 10.5 11.8 Tax Paid m -102,010 -91,150 -98,906 -108,503 EBIT Growth % 14.6 3.7 9.8 9.6 Chgs in Working Cap m 155,810 -3,767 -66,010 -56,246 Gross Profit Margin % 28.2 30.1 32.2 31.4 Net Interest Paid m 0 0 0 0 EBITDA Margin % 14.0 15.5 17.0 17.1 Other m -20,240 0 0 0 EBIT Margin % 10.5 9.9 10.8 10.7 Operating Cashflow m 495,500 464,876 453,565 526,543 Net Profit Margin % 9.1 7.7 8.2 8.1 Acquisitions m 92,300 0 0 0 Payout Ratio % 10.9 12.7 12.9 12.7 Capex m -781,090 -476,154 -460,315 -444,673 EV/EBITDA x 14.2 11.7 10.6 9.5 Asset Sales m 14,820 0 0 0 EV/EBIT x 19.0 18.3 16.7 15.2 Other m 11,050 -140 -140 -140
Investing Cashflow m -662,920 -476,294 -460,455 -444,813 Balance Sheet Ratios Dividend (Ordinary) m -0 -32,461 -35,412 -38,363 ROE % 11.9 9.8 9.5 9.8 Equity Raised m 0 0 0 0 ROA % 5.3 5.0 5.3 5.8 Debt Movements m 86,170 144,897 176,530 -83,470 ROIC % 6.6 6.1 6.2 6.4 Other m 0 0 0 0 Net Debt/Equity % 67.8 56.2 56.5 54.4 Financing Cashflow m 86,170 112,436 141,118 -121,833 Interest Cover x 9.0 6.5 5.4 5.2
Price/Book x 1.8 1.6 1.5 1.4 Net Chg in Cash/Debt m -81,250 101,019 134,228 -40,104 Book Value per Share 903.5 1,028.5 1,091.4 1,159.5
Free Cashflow m -285,590 -11,278 -6,750 81,870
Balance Sheet 2017A 2018E 2019E 2020E Cash m 30,230 131,249 265,477 225,373 Receivables m 81,770 69,076 69,601 77,407 Inventories m 534,600 521,874 507,975 572,130 Investments m 527,510 527,510 527,510 527,510 Fixed Assets m 4,177,510 4,291,324 4,376,722 4,411,308 Intangibles m 48,920 48,920 48,920 48,920 Other Assets m 1,667,480 1,667,620 1,667,760 1,667,900 Total Assets m 7,068,020 7,257,573 7,463,965 7,530,548 Payables m 765,950 736,763 657,379 673,095 Short Term Debt m 315,280 315,280 315,280 315,280 Long Term Debt m 1,521,480 1,521,480 1,771,480 1,771,480 Provisions m 0 0 0 0 Other Liabilities m 1,799,050 1,649,050 1,499,050 1,349,050 Total Liabilities m 4,401,760 4,222,573 4,243,189 4,108,905
Shareholders' Funds m 2,666,260 3,035,000 3,220,776 3,421,643 Minority Interests m 0 0 0 0 Other m 0 0 0 0 Total S/H Equity m 2,666,260 3,035,000 3,220,776 3,421,643
Total Liab & S/H Funds m 7,068,020 7,257,573 7,463,965 7,530,548
All figures in INR unless noted.
Source: Company data, Macquarie Research, July 2017
Macquarie Research Reliance Industries
25 July 2017 38
Important disclosures:
Recommendation definitions
Macquarie - Australia/New Zealand Outperform – return >3% in excess of benchmark return Neutral – return within 3% of benchmark return Underperform – return >3% below benchmark return Benchmark return is determined by long term nominal GDP growth plus 12 month forward market dividend yield
Macquarie – South Africa Outperform – expected return >+10% Neutral – expected return from -10% to +10% Underperform – expected return <-10%
Macquarie - Canada
Outperform – return >5% in excess of benchmark return Neutral – return within 5% of benchmark return Underperform – return >5% below benchmark return
Macquarie - USA Outperform (Buy) – return >5% in excess of Russell 3000 index return Neutral (Hold) – return within 5% of Russell 3000 index return Underperform (Sell)– return >5% below Russell 3000 index return
Volatility index definition*
This is calculated from the volatility of historical price movements. Very high–highest risk – Stock should be
expected to move up or down 60–100% in a year – investors should be aware this stock is highly speculative. High – stock should be expected to move up or down at least 40–60% in a year – investors should be aware this stock could be speculative. Medium – stock should be expected to move up or down at least 30–40% in a year. Low–medium – stock should be expected to move up or down at least 25–30% in a year. Low – stock should be expected to move up or down at least 15–25% in a year. * Applicable to Asia/Australian/NZ/Canada stocks only
Recommendations – 12 months Note: Quant recommendations may differ from Fundamental Analyst recommendations
Financial definitions
All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards).
Recommendation proportions – For quarter ending 30 June 2017
AU/NZ Asia RSA USA CA EUR Outperform 52.01% 55.36% 42.05% 46.38% 66.67% 43.60% (for global coverage by Macquarie, 2.98% of stocks followed are investment banking clients)
Neutral 37.73% 29.86% 42.05% 47.88% 27.91% 40.14% (for global coverage by Macquarie, 2.33% of stocks followed are investment banking clients)
Underperform 10.26% 14.78% 15.91% 5.74% 5.43% 16.26% (for global coverage by Macquarie, 1.15% of stocks followed are investment banking clients)
Company-specific disclosures: Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/research/disclosures.
Date Stock Code (BBG code) Recommendation Target Price 10-May-2016 RIL IN Outperform Rs1275.00 25-Apr-2016 RIL IN Outperform Rs1280.00 08-Jan-2016 RIL IN Outperform Rs1175.00 19-Oct-2015 RIL IN Outperform Rs1150.00 09-Sep-2015 RIL IN Outperform Rs1110.00 20-Apr-2015 RIL IN Outperform Rs1140.00 15-Apr-2015 RIL IN Outperform Rs1060.00 19-Jan-2015 RIL IN Outperform Rs1075.00
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Asia Sales Regional Heads of Sales
Miki Edelman (Global) (1 212) 231 6121
Jeff Evans (Boston) (1 617) 598 2508
Jeffrey Shiu (China, Hong Kong) (852) 3922 2061
Sandeep Bhatia (India) (9122) 6720 4101
Thomas Renz (Geneva) (41 22) 818 7712
Riaz Hyder (Indonesia) (6221) 2598 8486
Nick Cant (Japan) (65) 6601 0210
John Jay Lee (Korea) (822) 3705 9988
Nik Hadi (Malaysia) (603) 2059 8888
Gino C Rojas (Philippines) (632) 857 0861
Regional Heads of Sales cont’d
Paul Colaco (San Francisco) (1 415) 762 5003
Amelia Mehta (Singapore) (65) 6601 0211
Angus Kent (Thailand) (662) 694 7601
Ben Musgrave (UK/Europe) (44 20) 3037 4882
Christina Lee (UK/Europe) (44 20) 3037 4873
Sales Trading
Adam Zaki (Asia) (852) 3922 2002
Stanley Dunda (Indonesia) (6221) 515 1555
Sales Trading cont’d
Suhaida Samsudin (Malaysia) (603) 2059 8888
Michael Santos (Philippines) (632) 857 0813
Chris Reale (New York) (1 212) 231 2555
Marc Rosa (New York) (1 212) 231 2555
Justin Morrison (Singapore) (65) 6601 0288
Daniel Clarke (Taiwan) (8862) 2734 7580
Brendan Rake (Thailand) (662) 694 7707
Mike Keen (UK/Europe) (44 20) 3037 4905
This publication was disseminated on 24 July 2017 at 17:11 UTC.