Reliance industries balance sheet analysis

Reliance Industries balance sheet analysis

Basic Company Details 

Company	RELIANCE INDUSTRIES LTD
Current Stock Price (Rs)	1222.5
Face Value (Rs)	10
No. of Shares (Crore)	633.912319
Market Capitalization (Rs Crore)	774957.81

Key financial trends of reliance industries

Sales Growth (9-Year CAGR)                                              12.1%

Profit Before Tax Growth (9-Year CAGR)                        7.6%

Net Profit Growth (8-Year CAGR)                                      5.5%

Average Debt/Equity (5-Years, x)                                     0.8

Average Return on Equity (5-Years)                               10.2%

Average P/E (5-Years, x)                                                      21.6

Latest P/E (x)                                                                         19.1

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RELIANCE INDUSTRIES LTD  -   Free cash flow valuation                                      

Dhandho IV - Lower Range       

                                   

Year             FCF (Rs Cr)           PV of FCF (Rs Cr)

0              Excess Cash (Latest)          5,829

1              FY18       62,501                   55,804

2              FY19       71,876                   57,299

3              FY20       82,657                   58,834

4              FY21       90,923                  57,783

5              FY22       100,015                 56,751

6              FY23       110,016                 55,738

7              FY24       115,517                 52,254

8              FY25       121,293                 48,988

9              FY26       127,358                 45,926

10           FY27       133,726                  43,056

10                           1,337,256               430,561

Intrinsic Value                                      968,822

Current Mkt. Cap.                                774,958

Premium/(Discount) to IV                  -20%

Reliance Industrie is trading 20% discount from its intrinsic value. Wait for 50% for the investment to reduce the risk.

Ben Graham Formula (Low Range) Market Cap analysis                         

Year Ended         Mar/19

Avg 5-Yr Net Profit (Rs Crore)      28,263.4

PE Ratio at 0% Growth                  8.5

Long-Term Growth Rate                5.9        

Ben Graham Value (Rs Crore)       574,802

Current Market Cap (Rs Crore)     774,958

Reliance Industries is trading above the lower Ben Graham Formula (Low Range). Wait for the correction.

Ben Graham Formula (High Range)

Year Ended         Mar/19

Avg 5-Yr Net Profit (Rs Crore)      28,263.4

PE Ratio at 0% Growth                  8.5

Long-Term Growth Rate               11.8

               

Ben Graham Value (Rs Crore)      909,365

Current Market Cap (Rs Crore)    774,958

Reliance Industries is trading below the lower Ben Graham Formula (high Range). 

EXPLANATION                                                  

Ben Graham's Original Formula: Value = EPS x (8.5 + 2G)                                               

Here, EPS is the trailing 12 month EPS, 8.5 is the P/E ratio of a stock with 0% growth and g is the growth rate for the next 7-10 years                                                

                                                               

Ben Graham's Revised Formula: Value =[EPS x (8.5 + 2G) x 4.4] / Y                                                        

Here, 4.4 is what Graham determined to be his minimum required rate of return. At the time of around 1962 when Graham was publicizing his works, the risk-free interest rate was 4.4% but to adjust to the present, we divide this number by today’s AAA corporate bond rate, represented by Y in the formula above.                                                      

                                                               

Note: I have used Graham's original formula in the above calculations

Intrinsic Value Range                     

RELIANCE INDUSTRIES LTD                          

                                       Lower              Higher

Dhandho                      968,822              1,691,488

Ben Graham                574,802              909,365

DCF                             1,237,193         

Expected Return          791,760              

Current Market Cap.    7,74,958
          

                               

Explanation: Considering the above range, we can say that Reliance industries range is between Rs 8,93,114 crore to Rs1,30,000 crore. It's a big range, but that's fine (who is looking for precision?). Now, if the current market cap is within this IV range, it makes the stock reasonably/attractively priced. If the current market cap is higher then the higher value of the range, it makes it overpriced. But remember, these are just numbers!

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Visit this link to download the excel sheet of reliance industries 5-year balance sheet analysis   link

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