Reliance Industries declared its earnings on Saturday, posting quarterly net profit of Rs 5,957 crore, or about USD 1 billion – and becoming the first private Indian company to do so.
But even as profit growth appeared to have slowed down for petrochemicals giant in the past few years – its FY14 net profit stood at Rs 22,548 crore compared to Rs 19,272 three years prior to that – it may be only now that the company is entering a high-growth orbit that could see it double its profits in the next three-four years.
At the annual general meeting in June, chairman Mukesh Ambani had said RIL was looking about Rs 1.8 lakh crore into each of its key businesses: petrochemicals, oil & gas, retail and telecom.
The RIL chief had remarked that company was at the mid-point of the investment cycle "and would achieve as much in the next three years as it has achieved in the past 37 years."
Analysts concur with the belief that a huge growth phase beckons for the company in the years ahead: in a recent note, CLSA had said it sees RIL's operating profits double in the next three years.
Much of the expected growth can be attributed to an expected improvement over gas pricing, the company holding on to its high refining margins and businesses such as retail, telecom and shale gas achieving critical mass, according to a research report by UBS.
"We think an increase in gas price hike is likely soon, and the government focus to encourage domestic production and problems with KG-D6 should be resolved shortly and gas production visibility should improve," it said in a note.
"With USD 13 billion capex on track, USD 8.5 billion of petrochemical capex operational in phases, refinery cost advantages increasing with pet-coke gasifier operational by 2016 and enabling steady USD 8-plus gross refining margins and shale gas and retail also contributing to EBITDA, we forecast an 16 percent EBITDA CAGR over FY14-18," CLSA added.
At the AGM, Ambani had said by the time Reliance completes 40 years since its initial public offering – three years from now – it "will again be a radically different company".
According to UBS, the profit mix for the firm, too, could change significantly in the next few years. It sees Reliance's EBITDA breakup move from 44-31-13 percent (refinery, petrochemicals and oil & gas operations) in FY14 move to 25-41-21 percent in FY18.
The Reliance stock has been one of the big under-performers in the market – being virtually flat over the past few years.
But as it stands at the cusp of a major growth push, brokers such as CLSA believe the stock has the potential to double in the next three-four years. UBS believes Reliance could increase to Rs 1,400 in the next 12 months.
Disclosure: Network 18, which publishes moneycontrol.com, is part of the Reliance Group.
Reliance stock price
On July 18, 2014, Reliance Industries closed at Rs 976.20, down Rs 6.15, or 0.63 percent. The 52-week high of the share was Rs 1142.50 and the 52-week low was Rs 765.00.
The company's trailing 12-month (TTM) EPS was at Rs 67.98 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 14.36. The latest book value of the company is Rs 609.45 per share. At current value, the price-to-book value of the company is 1.60.
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