WHY RPL (RELIANCE PETROLEUM LTD.) IS SUPERIOR TO OTHER REFINING COMPANIES?

 

How did RPL fare versus all domestic oil refining and marketing companies with regards to their valuations and capacities? CNBC-TV18’s analysis throws up some interesting findings.

 

RPL has basically higher GRMs (Gross Refining Margins) compared to most other companies. Most of it is because of the latest machineries and technologies that RPL uses, produces estimates of about USD 15-18 per barrel of GRMs versus USD 6 of other companies.

 

A look at all the oil and marketing companies versus RPL will reveal what is in store. All these are 2010 estimates because RPL will go on-stream in 2010. So CNBC-TV18 analysis considered 2010 estimates.

 

The total revenue is close to about Rs 4,74,481 crore for all the oil and marketing companies put together versus Rs 21,908 crore for RPL – these are 2010 estimates.

 

PAT (profit after tax) for all the other oil and marketing companies is estimated to be close to about Rs 10,416 crore versus 2010 PAT of about Rs 7,424 crore for RPL. PAT is low for all these oil and marketing companies put together on those higher sales is because these companies have lower GRMs.

 

A look at the refining capacity reveals that RPL will have a refining capacity of close to about 28 million tonnes per annum versus the refining capacity of all the oil refining and marketing companies put together is about 117 million tonnes. That means that RPL has one-fifth the refining capacity of all the oil and marketing companies put together.

 

A look at the refining capacity reveals that RPL will have a refining capacity of close to about 28 million tonnes per annum versus the refining capacity of all the oil refining and marketing companies put together is about 117 million tonnes. That means that RPL has one-fifth the refining capacity of all the oil and marketing companies put together.

 

Having said that, MCap of all the oil and marketing companies is still lower than RPL. RPL’s MCap is about Rs 120,000 crore versus Rs 100,000 crore of all these oil refining and marketing companies.

 

CNBC-TV18 and other estimates value other oil refining companies less aggressively than RPL. Why these companies are conservatively estimated is because of the subsidy burden, which these companies have. The marketing losses that PSUs and other companies have to take have also been considered.

 

At some point in time, these marketing companies will be profitable. So the lower estimates that have taken on PAT will increase aggressively. Having said, that analysts are not saying that RPL is expensive or the other oil and marketing companies are cheaper at this point in time. They are just giving a comparison between all the other oil refining and marketing companies versus RPL at this point in time.

 

RPL’s EPS is close to about 16.5 in 2010 versus all the oil refining and marketing companies; it is close to about Rs 202. So one can imagine the difference over there, also price to earnings ratio of RPL in 2010 is estimated about 16.1 versus 9.6 - that is the average price to earnings ratio of 2010 of other oil refining and marketing companies.

 

These are just comparisons, analysts are not saying that one thing is cheaper than the other or one thing is more expensive than the other. These are just comparisons between other oil refining and marketing companies and RPL.

 

OIL COS FY10e 

(Rs Cr)                        Revenue         PAT

IOC                 2.35 lk 5,205

BPCL             1.02 lk             1,601

HPCL             82,909            1,595

Bongaigaon        5,909         331

Chennai           21,854           670

MRPL             26,191            1,014

Total                4.74 lk 10,416

 

OIL COS FY10e

(Rs Cr)                                    Revenue         PAT

RPL                            51,908            7,424

 

OIL COS FY10e

(Rs)                 EPS

IOC                 43.70

BPCL             44.30

HPCL             47.10

Bongaigaon   16.60

Chennai          45

MRPL             5.80

Total                202 

 

OIL COS FY10e

(Rs)                 EPS

RPL                16.50

    

OIL COS MKT CAP    

                        (Rs Cr)

IOC                 55,650    

BPCL             10,170    

HPCL             8,050    

Bongaigaon       1,376    

Chennai          4,830    

MRPL             13,901    

Essar              5,851    

Total                99,828    

 

OIL COS MKT CAP

                        (Rs Cr)

RPL                120,802

    

OIL COS VALUATIONS

FY10e             P/E

IOC                 11x

BPCL             7.6x

HPCL             5.0x

Bongaigaon   4.2x

Chennai          7.1x

MRPL             13.8x

 

Total                9.6x

RPL                16.1x

    

OIL COS CAPACITY

Refining          mtpa

Total ex-RPL  148.97

IOC                 60.2

HPCL             13.4

BPCL             22.3

Essar              10.4

ONGC+MRPL           10.4   

 

REFINING CAPACITY

                        mtpa

RPL                28

 

ANALYSING RPL

-GRMs higher than most other companies 

-Higher GRMS due to latest machineries, better technology

-GRM estimate of $15-17/bbl Vs $6/bbl for others

-RPL refining capacity of 28 mtpa Vs 117 mtpa for others

-Mkt cap of all other refining, mkt cos  still lower than RPL

-Subsidy burden hits state run oil refininy companies

-Other oil refining cos have higher profits even after a/c for mktg losses

-RPL will start earning profits in FY2010

-RPL EPS then would be Rs 16.50 Vs Rs 202 of others put together

-FY10 total rev of oil refining cos seen at Rs 4.75 lk cr Vs Rs 21,908 cr of RPL

-FY10 total PAT of oil refining cos seen at Rs 10,416 cr Vs Rs 7,424 cr of RPL