23 January 2021 India | Oil and Gas | Company Update
Reliance Industries | BUY
Operationally in-line results; focus on improvement in Jio’s subscriber addition
RIL’s consolidated EBITDA for 3QFY21 was largely in-line at INR 216bn; however, PAT (before Dayanand Mittal minority) was higher at INR 149bn (vs. JMFe of INR 126bn) due to sharp decline in interest [email protected] | Tel: (+91 96) 1938 8870 cost (to INR 43bn vs. JMFe of INR 52bn) and continued lower taxes. Jio EBITDA was up 6% Vishnu K G QoQ led by 4% QoQ growth in ARPU; however, net additions continued to be subdued due [email protected] | Tel: (+91 94) 4689 6452 to market share losses in incremental MBB subscribers. Further, Retail business is gradually Krishan Parwani recovering post lockdown while margin was healthy at ~7% due to rebound in high margin [email protected] | Tel: (+91 96) 6209 5500 Fashion & Lifestyle segment to pre-Covid levels. O2C business EBITDA was in-line; but lack of details make it difficult to comment on Refining & Petchem margins. Reported net debt declined to INR 369bn at end 3QFY21 (vs. INR 935bn at end 2QFY21 and INR 1,610bn at end FY20) due to the funds received from asset monetisation – Exhibit 3. We reiterate BUY with an unchanged TP of INR 2,500/share as we expect a strong FCF generation phase with major capex completed and strong 17-18% EPS CAGR likely over the next 3-5 years. Recommendation and Price Target Another quarter of subdued subscriber addition for Jio, ARPU surprises positively: Jio reported Current Reco. BUY EBITDA of INR 81.6bn in 3QFY21, a growth of 6% QoQ and was marginally higher vs. JMFe, driven Previous Reco. BUY by robust ARPUs despite muted net subscriber addition (at 5.2mn as expected). In our view, this Current Price Target (12M) 2,500 Upside/(Downside) 21.7% could be mainly due to market share losses in incremental MBB subscribers. However, management Previous Price Target 2,500 expects continued improvement in subscriber additions as more areas of economy open up. ARPU Change NA surprised positively at INR 151 (vs. JMFe of INR 147), driven by the residual impact of Dec’19 tariff hikes and strong usage metrics – data usage per subscriber jumped to 12.9GB/month (vs. Key Data – RIL IN Current Market Price INR2,054 12.1GB/month in 1QFY21 during the peak of the pandemic). Traction was also seen in other digital Market cap (bn) INR13,524.3/US$182.5 investments, with consolidated EBITDA of Jio Platforms Ltd (JPL) growing 6.4% QoQ to INR 84.8bn – Free Float 40% Exhibit 2. We expect Jio to reach ~45% revenue market share (RMS) by FY25E, on the back of Shares in issue (mn) 6,761.6 continued subscriber additions and ARPU increase (A tale of supremacy, defence & survival). Diluted share (mn) 6,444.7 3-mon avg daily val (mn) INR37,938.3/US$511.9 Retail business gradually recovering post lockdown: Retail adjusted EBITDA was 10% below JMFe at 52-week range 2,371/867 INR 23.2bn (up 15% QoQ but still down 15% YoY); however, EBITDA margin was healthy at ~7% Sensex/Nifty 39,614/11,642 due to rebound in high margin Fashion & Lifestyle segment to pre-Covid levels. In 3QFY21, 96% of INR/US$ 74.1 stores were operational (vs. 85%/50% in 2QFY21/ and 50% in 1QFY21) but only half were fully Price Performance operational; footfalls were still below pre-Covid levels and footfall in malls is still at 50%. % 1M 6M 12M O2C EBITDA in-line; lack of details make it difficult to comment on Refining & Petchem margins: Absolute -8.0 41.5 40.2 O2C business (i.e. refining and petchem segment) EBITDA at INR 98bn (up 10% QoQ) was largely in- Relative* -11.6 20.4 41.8 * To the BSE Sensex line; but it’s difficult to comment on refining and petchem margins separately as company has
started disclosing earnings and operational performance for combined O2C business. Management expects petchem margins recovery to continue on rebound in domestic demand while refining margin outlook continues to be subdued and contingent on the recovery in global oil demand.
Entering a strong FCF generation phase – reiterate BUY: We cut our FY22-23 EBITDA estimates by 1- 2% factoring weak GRM; however, our TP is unchanged at INR 2,500 as we roll forward our valuations. RIL is entering a strong FCF generation phase with major capex completed and expectation of strong 17-18% EPS CAGR over the next 3-5 years. Hence, we re-iterate BUY (A Giant Digital Leap). At CMP, stock is trading at FY23E P/E of 17.0x (3 yr avg: 20.2x) and FY23E EV/EBITDA of 8.2x (3 yr avg: 11.7x). Key risks: a) weak subscriber addition and limited ARPU hike; b) challenges in monetisation of digital opportunities/new commerce; and c) weak downstream margins. Financial Summary (INR mn) Y/E March FY19A FY20A FY21E FY22E FY23E Net Sales 5,692,090 5,967,430 4,922,651 6,428,703 7,233,779 Sales Growth (%) 45.3 4.8 -17.5 30.6 12.5 JM Financial Research is also available on: EBITDA 841,670 882,170 810,522 1,177,307 1,443,660 Bloomberg - JMFR
JM Financial Institutional Securities Limited Reliance Industries 23 January 2021 3QFY21 Result Review Key takeaways from post-earnings webinar:
Digital business:
Gross additions were subdued at 25.1mn in 3QFY21 (vs. 27.2mn seen in 2QFY21) and lower than the pre-Covid run rate of ~30-35mn. Management indicated an improving outlook for gross additions as normalcy returns to more parts of the country
Management reiterated the readiness of their 4G network to be upgraded to 5G, and highlighted that Jio is now at the cusp of launching 5G using solutions which have been developed internally through JPL. Jio highlighted that many of their 5G technologies have already undergone field trials.
While management did not separately give Jio Fiber subscriber numbers, Jio has indicated significant traction in the FTTH business, and highlighted that they are now the largest private sector player in FTTH. As per management, there are more than 200 third party applications available on Jio Fibre and Jio would introduce offerings like smart IoT and gaming solutions on top of the existing offerings. Jio further has plans to increase monetisation of Jio Fiber through advertisements etc.
RIL highlighted that they are working with partners, to provide a comprehensive solutions for SMBs (Small and Medium Businesses), to meet their enterprise needs. Jio also plans to work with sister companies like Reliance Digital to create unique offerings for SMBs. Jio’s Enterprise grade video conferencing solution, Jio Meet crossed 15mn subscribers in 3QFY21.
Exhibit 1.Jio standalone quarterly snapshot Consolidated, INR mn 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 2QFY21 3QFY21 QoQ (%) YoY (%) Revenue 123,990 131,570 139,860 148,610 168,330 176,780 185,440 4.9% 32.6% Operating costs 77,130 79,910 83,850 86,600 95,520 99,770 103,780 4.0% 23.8% -Network costs 38,240 41,230 44,230 45,600 52,250 54,260 56,530 4.2% 27.8% -License fees, SUC and other revenue share 12,870 13,740 14,830 15,760 18,180 19,460 20,390 4.8% 37.5% -Other costs 26,020 24,940 24,790 25,240 25,090 26,050 26,860 3.1% 8.3% EBITDA 46,860 51,660 56,010 62,010 72,810 77,010 81,660 6.0% 45.8% Depreciation & Amortization 16,570 17,750 17,960 21,680 27,380 28,710 29,100 1.4% 62.0% EBIT 30,290 33,910 38,050 40,330 45,430 48,300 52,560 8.8% 38.1% Interest cost 16,600 18,710 19,530 11,330 11,680 10,220 8,500 -16.8% -56.5% Reported PBT 13,690 15,200 18,520 29,000 33,750 38,080 44,060 15.7% 137.9% Tax 4,780 5,300 3,250 6,000 8,550 9,640 11,150 15.7% 243.1% Reported PAT 8,910 9,900 13,500 23,310 25,200 28,440 32,910 15.7% 143.8% Reported EPS 1.50 1.67 2.58 3.63 3.91 4.41 5.11 15.7% 98.2% Tax/PBT (%) 34.9% 34.9% 17.5% 20.7% 25.3% 25.3% 25.3% Source: Company, JM Financial. Total Digital EBITDA was up ~7% QoQ to INR 89.4bn, of which JPL’s EBITDA was INR 84.8bn (including Jio business EBITDA of INR 81.6bn). Hence, other digital EBITDA (ex-Jio) improved to INR 7.8bn in 3QFY21 vs. INR 6.4bn in 2QFY21 indicating rising traction in some of the digital start-up investments. This other digital EBTDA can further be divided into: a) Entities inside JPL: JPL’s EBITDA ex-Jio business grew to INR 3.2bn in 3QFY21, vs. INR 2.7bn in 2QFY21, which indicates increased traction in the start-ups that JPL had invested in. b) Entities outside JPL: Digital EBITDA ex-JPL was at INR 4.6bn in 3QFY21 vs INR 3.7bn in 2QFY21.
Exhibit 2.RIL consolidated Digital EBITDA break-up into Jio an ex-Jio Digital assets INR mn 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 2QFY21 3QFY21 Digital EBITDA a 50,270 54,640 60,240 68,330 78,030 83,450 89,420 JPL EBITDA b 73,320 79,710 84,830 Jio EBITDA c 46,860 51,660 56,010 62,010 72,810 77,010 81,660 Digital EBITDA ex-Jio d=a-c 3,410 2,980 4,230 6,320 5,220 6,440 7,760 -Entities inside JPL e=b-c 510 2,700 3,170 -Entities outside JPL f=d-e 4,710 3,740 4,590 Source: Company, JM Financial. Please note JPL, apart from the telecom assets (i.e. Jio), contains tech investments like Embibe ( Ed-tech), OTT platforms, Haptik (AI based messaging app) to name a few. As per our understanding digital assets outside JPL consists of logistic, tech start-ups like Grab-a-Grub etc. which work with the retail side of the business
JM Financial Institutional Securities Limited Page 2 Reliance Industries 23 January 2021
Gross and net debt details:
Reported net debt at end 3QFY21 was INR 369bn (vs. net debt of INR 935bn at end 2QFY21 and net debt of INR 1,610bn net debt at end FY20) as consolidated gross debt at end 3QFY21 was INR 2,574bn (vs INR 2,793bn at end 2QFY21 and INR 3,363bn at end FY20); while cash and cash equivalents at end 3QFY21 was INR 2,205bn (vs. INR 1,857bn at end 2QFY21 and INR 1,753bn as on end FY20). Due to asset monetisation and rights issue, the company received NR 735bn in 3QFY21 while cumulative cash inflow is INR 2,202bn (with additional balance INR 398bn of rights issue is likely to be received in 2021).
Exhibit 3.RIL consolidated debt change details INR Bn end FY20 end 1HFY21 end 3QFY21 Reported Gross debt 3,363 2,793 2,574 Less: Cash and cash equivalent 1,753 1,857 2,205 Reported Net debt 1,610 935 369
Funds received from asset monetisation and rights issue in 1HFY21 and in 3QFY21 1,467 735 Source: Company, JM Financial. Note: Above debt details is excluding capex creditors and spectrum liability Retail business:
Management highlighted that though 96% of overall stores re-started after easing of Covid restriction, only half them were fully operational. Moreover, during the quarter, footfalls were still below pre-Covid levels and footfall recovery in malls is still at 50%.
Growth momentum continued to sustain at Consumer Electronic stores (ex-Jio devices), on the back of festive season and strong performance in Tier 2 and 3 cities. In the fashion and lifestyle segment, there was a strong sequential recovery led by higher ticket sizes and conversions despite lower footfalls. Moreover, in grocery segment, sequentially higher average bill values have more than offset the lower footfalls.
Management wants to drive growth by a) Planning new store expansions b) Ensuring seasonal readiness, c) Accelerating Digital commerce, d) expanding the categories in JioMart, and e) Developing the vendor ecosystem and supply chain by ensuring an inclusive approach to retail, by partnering with kiranas, small merchants and farmers. O2C and E&P business:
It was indicated that the transportation fuel outlook continued to be challenging with excess supply and second Covid wave hurting demand from European and US markets. However, management expects refining margin to gradually improve with recovery in demand and drawdown of inventories.
Management highlighted that the rebalanced fuel mix is likely to include more liquid due to higher LNG cost and increased flexibility on account of gasification complex.
PVC and PP margins outlook remain constructive due to favourable demand-supply; polyester chain margins are expected to remain firm on improving end markets.
Key risk to the O2C margins is the overhang of product stocks and excess supply from China and resumption of lockdowns in US and Europe.
RIL took impairment write-off for US shale business of INR 156.9bn; however recognised deferred tax asset of INR 155.8bn resulting in an exceptional loss of INR 1.2bn in 3QFY21.
JM Financial Institutional Securities Limited Page 3 Reliance Industries 23 January 2021
Exhibit 4.RIL consolidated quarterly snapshot INR Mn 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 2QFY21 3QFY21 QoQ (%) YoY (%) Revenue (net of GST and excise) 15,69,760 14,85,260 15,31,790 13,62,400 8,82,530 11,12,360 11,78,600 6.0% -23.1% Operating costs 13,56,610 12,63,740 13,05,530 11,44,580 7,13,780 9,22,910 9,62,940 4.3% -26.2% EBITDA 2,13,150 2,21,520 2,26,260 2,17,820 1,68,750 1,89,450 2,15,660 13.8% -4.7% Depreciation 50,110 53,150 55,450 63,320 63,080 66,260 66,650 0.6% 20.2% EBIT 1,63,040 1,68,370 1,70,810 1,54,500 1,05,670 1,23,190 1,49,010 21.0% -12.8% Interest 51,090 54,500 54,040 60,640 67,350 60,840 43,260 -28.9% -19.9% Other income 31,460 36,140 34,050 41,330 43,880 42,490 44,530 4.8% 30.8% PBT 1,43,660 1,50,550 1,49,620 92,230 1,35,080 1,05,890 1,49,820 41.5% 0.1% Tax 42,250 37,030 31,210 26,770 2,600 -130 880 NM -97.2% Reported PAT before Minority interest 1,01,410 1,13,520 1,18,410 65,460 1,32,480 1,06,020 1,48,940 40.5% 25.8% Reported EPS before Minority interest (INR) 17.1 19.2 20.0 10.3 20.6 16.4 23.1 40.5% 15.7% Reported PAT after Minority interest 1,01,040 1,12,620 1,16,400 63,480 1,32,330 95,670 1,31,010 36.9% 12.6% Tax/PBT (%) 29.4% 24.6% 20.9% 29.0% 1.9% -0.1% 0.6% Segment EBITDA O2C* - - 1,35,680 - - 88,410 97,560 10.3% -28.1% Petrochemicals* 88,100 89,270 72,390 59,380 44,300 59,640 NA NM NM Refining* 51,520 56,590 68,080 66,140 38,180 30,020 NA NM NM E&P 2,070 1,280 640 -460 -320 -1,940 40 -102.1% -93.8% Organised retail 20,490 23,220 27,360 25,690 10,830 20,290 31,020 52.9% 13.4% Digital service 49,080 53,240 60,240 68,330 78,030 83,450 89,420 7.2% 48.4% Financial Services 0 0 920 3,520 3,800 5,300 3,030 -42.8% NM Others 8,870 8,090 9,440 16,340 14,090 10,750 14,940 39.0% 58.3% Total 2,20,130 2,31,690 2,39,070 2,38,940 1,88,910 2,07,510 1,38,450 -33.3% -42.1% Segment EBIT O2C* - - 1,12,840 - - 67,500 76,470 13.3% -32.2% Petrochemicals* 75,080 76,020 58,660 45,530 33,920 48,950 NA NM NM Refining * 45,080 49,570 59,340 57,060 28,920 20,000 NA NM NM E&P -2,490 -3,060 -3,660 -4,850 -5,110 -6,300 -4,470 -29.0% 22.1% Organised retail 17,770 20,350 23,950 20,720 7,220 15,420 26,090 69.2% 8.9% Digital service 30,800 33,220 39,030 42,510 47,080 51,570 57,160 10.8% 46.5% Financial Services 0 0 920 3,520 3,800 5,300 3,030 -42.8% NM Others 4,830 3,990 6,640 12,600 10,950 7,510 11,630 54.9% 75.2% Total 1,71,070 1,80,090 1,79,720 1,77,090 1,26,780 1,41,000 1,69,910 20.5% -5.5% Source: Company, JM Financial, *O2C is carved out from 3QFY21 and only YoY and QoQ comparable details are available
Exhibit 5.RIL Segment-wise breakdown INR Mn 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 2QFY21 3QFY21 QoQ (%) YoY (%) Refining segment Crude throughput (mmt) 17.5 16.7 18.1 18.3 16.6 15.3 16.7 9.2% -7.7% Capacity utilisation 103% 98% 106% 107% 97% 90% 98% S'pore Dubai GRM (USD/bbl) 3.5 6.5 1.6 1.3 -0.9 0.0 1.2 2900.0% -25.0% Jio No of subs (Mn) 331.3 355.0 370.0 387.5 398.3 405.6 410.8 1.3% 11.0% QoQ increase in no of subs (Mn) 24.6 23.7 15.0 17.5 10.8 7.3 5.2 ARPU (INR/month) 122 120 128 131 140 145 151 4.1% 17.6% MoU (Mins/month) 821 789 760 771 756 776 796 2.6% 4.7% Data usage (GB/month) 11.4 11.7 11.1 11.3 12.1 12.0 12.9 7.5% 16.2% Retail segment Gross revenue (INR mn) 3,82,160 4,12,020 4,53,270 3,82,110 3,16,330 4,11,000 3,78,450 -7.9% -16.5% EBITDA (INR mn) 20,600 23,220 27,270 25,560 10,830 20,060 30,870 53.9% 13.2% EBITDA margin* (%) 5.4% 5.6% 6.0% 6.7% 3.4% 4.9% 8.2% Source: * on gross revenue basis, Company, JM Financial
JM Financial Institutional Securities Limited Page 4 Reliance Industries 23 January 2021 Key Assumptions and Estimates Exhibit 6.Key Assumptions FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E FY24E FY25E Brent crude price (USD/bbl) 47.5 49.0 57.6 70.2 60.9 43.0 55.0 55.0 55.0 55.0 Exchange rate (INR/USD) 65.5 65.5 64.5 69.9 70.9 74.5 74.5 76.0 77.5 79.1 Refining EBITDA (INR Bn) 268 286 290 261 245 151 232 276 322 329 Crude throughput 69.6 70.1 69.8 68.3 70.6 65.7 70.6 70.7 70.7 70.8 Margins (USD/bbl) S'pore Dubai GRM 7.5 5.8 7.2 4.9 3.2 0.5 3.5 4.5 5.0 5.0 RIL's total GRM premium 3.3 5.2 4.4 4.3 5.7 5.7 4.5 4.5 5.0 5.0 a) RIL normal GRM premium 3.3 5.2 4.4 4.3 5.7 5.7 4.0 3.8 4.0 4.0 b) Petcoke gasification addition to GRM 0.0 0.0 0.5 0.8 1.0 1.0 RIL's total GRM 10.8 11.0 11.6 9.2 8.9 6.2 8.0 9.0 10.0 10.0 Refining cash opex 2.8 2.7 2.8 1.8 2.3 2.0 2.0 2.0 2.0 2.0 Refining EBITDA 8.0 8.3 8.8 7.4 6.6 4.2 6.0 7.0 8.0 8.0 Petrochemicals EBITDA (INR Bn) 137 165 259 379 309 245 350 397 417 438 EBITDA/ton (USD/ton) 155 176 234 273 218 177 230 253 258 263 Sales volumes (mmtpa) Polymers 4.6 4.5 4.9 5.8 6.0 5.6 6.1 6.2 6.3 6.3 Polyesters 2.2 2.3 2.6 2.9 2.9 2.7 3.0 3.0 3.0 3.1 Fiber intermediaries 6.4 6.9 9.3 10.9 10.8 10.0 11.0 11.2 11.3 11.4 Total 13.5 13.9 17.1 19.8 20.0 18.6 20.5 20.7 20.9 21.1 E&P EBITDA (INR Bn) 69 13 17 16 4 7 30 62 87 112 Gas production (mmscmd) 32 25 21 14 11 7 19 26 32 38 Gas realisation (USD/mmbtu) 4.7 3.8 4.3 5.1 5.3 5.5 5.4 6.4 6.3 6.3 Digital EBITDA (INR Bn) 67 153 225 325 450 558 665 739 EBITDA margin (%) 33.4% 37.2% 38.8% 45.1% 51.3% 51.6% 52.1% 50.8% Wireless segment Subscribers (mn - EoP) 187 307 388 422 440 473 493 501 ARPU (INR) 149 133 130 146 162 177 192 205 5G/Enterprise Revenues (INR bn) 0 0 35 56 83 FTTH segment Subscribers (mn - EoP) 3 9 14 19 25 ARPU (INR) 549 549 549 560 571 Retail EBITDA (INR Bn) 9 12 25 62 97 80 111 147 189 241 EBITDA margin (%) 4.1% 3.5% 3.7% 4.7% 5.9% 5.2% 6.1% 6.5% 6.9% 7.3% Net Store additions (#) 960 483 4,004 2,863 1,376 145 990 890 890 930 Gross revenue per average store (INR) 55 56 73 112 132 117 131 152 174 199 - YoY grow th (%) -3% 1% 31% 54% 17% -11% 12% 16% 15% 14% EBITDA break-up (INR Bn) Refining 268 286 290 261 245 151 232 276 322 329 Petchem 137 165 259 379 309 245 350 397 417 438 E&P 69 13 17 16 4 7 30 62 87 112 Digital 67 153 225 325 450 558 665 739 Retail 9 12 25 62 97 80 111 147 189 241 Financial Services & Others 25 51 54 6 42 3 4 5 5 6 Total 507 526 712 877 922 811 1,177 1,444 1,685 1,865 Energy business 474 463 565 656 557 403 612 735 826 879 Non-energy business (incl others) 33 62 146 221 364 408 565 709 859 986 EBITDA proportion Refining 53% 54% 41% 30% 27% 19% 20% 19% 19% 18% Petchem 27% 31% 36% 43% 34% 30% 30% 27% 25% 23% E&P 14% 2% 2% 2% 0% 1% 3% 4% 5% 6% Digital 0% 0% 9% 17% 24% 40% 38% 39% 39% 40% Retail 2% 2% 4% 7% 10% 10% 9% 10% 11% 13% Financial Services & Others 5% 10% 8% 1% 5% 0% 0% 0% 0% 0% Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Energy business 93% 88% 79% 75% 60% 50% 52% 51% 49% 47% Non-energy business (incl others) 7% 12% 21% 25% 40% 50% 48% 49% 51% 53% Source: Company, JM Financial
JM Financial Institutional Securities Limited Page 5 Reliance Industries 23 January 2021 Valuation Our Target Price for RIL of INR 2,500/share is computed on a sum-of-the-parts (SOTP) valuation method: a) Petchem segment at an EV of INR 455/share based on 7.5x forward EV/EBITDA, in-line with the implied Saudi Aramco deal multiple; b) Refining segment at an EV of INR 313/share based on 7.5x forward EV/EBITDA, in-line with the implied Saudi Aramco deal multiple; c) E&P segment at an EV of INR 68/share based on 8.0x forward EV/EBITDA; higher multiple as we EBITDA is likely to jump 3x due to a rise in gas production from new fields; d) Digital segment (RIL’s 67.05% stake in JPL) at an EV of INR 950/share comprising: i) Telecom business at INR 780/share based on DCF valuation; implied valuation of 13.9x EV/EBITDA; ii) Option value of duopoly market at INR 64/share; and iii) Digital opportunities at INR 106/share based on potential monetisation of Video OTT apps, audio OTT and Consumer IoT business. e) Retail business (RIL’s 89.91% stake) at an EV of INR 489/share based on 25x forward EBITDA. Further, we value Jio Mart at an EV of INR 106/share, factoring the opportunity of digitisation of Kirana store. RIL is entering a strong FCF generation phase with major capex completed and expectation of strong 17-18% EPS CAGR over the next 3-5 years led by Digital and Retail businesses. Hence, we maintain our BUY rating and TP of INR 2,500/share At CMP, stock is trading at FY23E P/E of 17.0x (3 yr avg: 20.2x), FY23E P/B of 1.7x (3 yr avg: 1.8x) and FY23E EV/EBITDA of 8.2x (3 yr avg: 11.7x).
Exhibit 7.RIL Sum-of-the-parts valuation - our Target Price for RIL is INR 2,500/share Valuation EBITDA Valuation Valuation Valuation Valuation Business segment methodology (INR Bn) multiple (INR bn) (USD bn) (INR/share) Comments Energy business 5,308 71 836 Valued at 7.5x EV/EBITDA; in-line with multiple Petchem EV/ EBITDA 385 7.5 2,888 39 455 implied by Saudi Aramco deal Valued at 7.5x EV/EBITDA; in-line with multiple Refining EV/ EBITDA 265 7.5 1,989 27 313 implied by Saudi Aramco deal Valued at 8x EV/EBITDA; higher multiple used as E&P EV/ EBITDA 54 8.0 430 6 68 EBITDA to jump 3x Digital business (for RIL's 67.05% share) 6,033 81 950 Based on DCF valuation; implied valuation of 13.9x a) Telecom business DCF 4,953 66 780 EV/EBITDA 50% probability of duopoly market; Jio garnering 40% b) Optional upside in Telecom business 409 5 64 of VIL subscriber without any ARPU dilution Based on potential monetization of Video OTT apps, c) Digital opportunities 671 9 106 JioSaavn and Consumer IoT business Retail business (for RIL's 89.91% stake) EV/ EBITDA 3,777 51 595 Valued at 25x EV/EBITDA, based on peers valuation a) Retail business 3,102 42 489 range Valuing kirana digitisation opportunity assuming Jio Mart gets ~10% market share in General Trade b) JioMart New commerce business 675 9 106 ecommerce market by FY30 Total Enterprise Value 15,118 203 2,381 Factoring: a) INR1,521bn from 32.95% stake sale in JPL; b) INR473bn from 10.09% stake sale in Retail; Less: Net Debt -759 -10 -119 c) INR76bn from BP; and d) rights issue of INR531bn Total Equity Value 15,877 213 2,500 Source: JM Financial Note: We have used 6,349mn shares for our target price computation (including 423mn Rights shares but excluding 413mn Treasury shares)
JM Financial Institutional Securities Limited Page 6 Reliance Industries 23 January 2021
Risks along with EPS and valuation sensitivity a) Refining margin sensitivity: Every USD 1/bbl increase/decrease in GRM has a positive/negative impact of 1% of our valuation, 4% of our FY23E EPS, and 3% of our FY23E EBITDA. An unexpected decline in refining margin could have a negative impact on RIL’s earnings and valuation. b) Petchem margin sensitivity: Every USD 20/ton increase/decrease in EBITDA margins has a positive/negative impact of 1% of our valuation, 3% of our FY23E EPS, and 2% of our FY23E EBITDA. An unexpected slide in petchem EBITDA margins could hurt RIL’s earnings and valuation. c) Retail margin sensitivity: Every 50bps increase/decrease in retail EBITDA margins has a positive/negative impact of 2% of our valuation, 1% of our FY23E EPS and FY23E EBITDA. Any downside to retail profitability could have a negative impact on RIL’s earnings and valuation. d) ARPU and subscriber sensitivity: Every INR 10 increase/decrease in ARPU has a positive/negative impact of 2% of our valuation, 4% our FY23E EPS, and 3% of our FY23E EBITDA. Every 20mn increase/decrease in subscribers has a positive/negative impact of 1% of our valuation, 2% our FY23E EPS, and 1% of our FY23E EBITDA. Lower than expected ARPU and subscriber growth could have a negative impact on RIL’s earnings and valuation.
Exhibit 8.RIL Earnings and valuation sensitivity Change Impact on FY23 EBITDA Impact on FY23 EPS Impact on TP FY23E Base case assumption INR bn % change INR % change INR % change GRM (USD/bbl) 9.0 +/- USD 1/bbl 40 3% 4.3 4% 35 1% Petchem EBITDA margins (USD/ton) 253 +/- USD 20/tn 31 2% 3.4 3% 28 1% Retail EBITDA margins (%) 6.5% +/- 0.5% 14 1% 1.6 1% 38 2% Jio w ireless ARPU 177 +/- INR 10 44 3% 4.9 4% 38 2% Jio w ireless subscriber (mn) 473 +/-20mn 17 1% 1.9 2% 26 1% Base case 1,444 112 2,500 Source: JM Financial RIL’s major capex phase behind us; entering strong FCF generation phase RIL ended a major capex phase - incurring INR 6,680bn during FY14-FY20 - primarily to build its Digital business and also for capacity expansion in its O2C business. With major capex completed, we expect it to moderate to a more normalised level of ~ INR 400-500bn p.a. going forward. Further, we expect RIL’s EPS to post a strong 16-17% CAGR over next 3-5 years led by growth potential in the Digital and Retail business. Hence, we estimate RIL’s FCF yield to improve from 2% in FY20 to 6% in FY25 as RIL will generate free cash flow of INR 336bn in FY21, which will grow to INR 889bn by FY25.
Exhibit 9.RIL’s major capex phase is behind us (INR bn)
Source: Company, JM Financial JM Financial Institutional Securities Limited Page 7 Reliance Industries 23 January 2021
Exhibit 10.RIL’s segment-wise capex break-up – major capex phase is behind us (INR bn)
Source: Company, JM Financial
Exhibit 11.RIL’s Net Debt - Equity on a steep declining trend Exhibit 12.RIL’s FCF and FCF yield to rise sharply
Source: Company, JM Financial Source: Company, JM Financial
Exhibit 13.RIL 1-year forward PE band
Source: JM Financial, Bloomberg
JM Financial Institutional Securities Limited Page 8 Reliance Industries 23 January 2021
Exhibit 14.RIL 1-year forward PB band
Source: JM Financial, Bloomberg
Exhibit 15.RIL 1-year forward EV-EBITDA band
Source: JM Financial, Bloomberg
JM Financial Institutional Securities Limited Page 9 Reliance Industries 23 January 2021
Exhibit 16.Global telecom and digital valuations P/E FY20-22 EPS CY21/FY22 EV/EBITDA CY19/FY20 CY20/FY21 CY21/FY22 CAGR RoE CY19/FY20 CY20/FY21 CY21/FY22 Jio (JMFe) 132.2 53.3 28.5 111.3% 11.0% 34.0 22.3 15.9 Bharti Airtel NM NM 35.7 NM 10.7% 9.4 8.6 7.2 Vodafone Idea NM NM NM NM NM 9.4 10.3 6.9 Telecom comparables Vodafone Plc NM 21.7 18.6 NM 3.9% 7.3 7.2 7.4 AT&T 16.8 9.3 9.2 28.3% 12.4% 7.7 6.8 6.7 Verizon 12.8 11.9 11.4 3.6% 27.3% 7.5 7.4 7.1 China Mobile 11.2 7.5 7.3 2.1% 9.4% 2.9 1.4 1.4 XL Axiata 47.0 15.0 19.8 35.3% 5.4% 5.6 4.3 4.1 MTN Group 17.9 8.3 8.3 24.0% 15.0% 4.2 3.0 3.1 Digital Comparables Tencent 34.1 45.2 36.2 27.2% 23.0% 21.2 32.0 26.6 Alibaba 60.9 34.0 25.3 39.9% 18.1% 32.4 27.7 20.5 Amazon 80.3 68.6 55.9 58.8% 23.2% 23.6 30.4 24.3 Alphabet 27.7 32.9 27.4 17.8% 17.6% 17.1 18.2 14.9 Facebook 25.1 27.1 24.3 31.6% 21.5% 17.5 16.3 14.1 Netflix 78.3 86.2 57.5 53.9% 32.5% 52.4 52.2 39.6 Apple 18.4 42.2 34.2 15.6% 110.9% 11.4 28.5 24.2 Source: Bloomberg, JM Financial, Company. Jio equity value and EV taken at the last transaction value of INR 4.91tn and INR 5.16tn respectively
Exhibit 17.Global Petchem companies’ valuation snapshot EV/EBITDA (x) EBITDA Margins (%) P/E (x) P/B (x) ROE (%) Company FY21/CY20 FY22/CY21 FY21/CY20 FY22/CY21 FY21/CY20 FY22/CY21 FY21/CY20 FY22/CY21 FY21/CY20 FY22/CY21 Global (ex Asia) peers DoW 10.3 8.3 14.4 16.4 38.5 19.2 3.4 3.5 7.9 17.5 Du Pont 14.9 14.0 24.6 24.9 25.2 23.3 1.5 1.4 5.4 5.8 Wacker Chemie 10.1 7.0 14.2 18.8 36.9 21.4 3.0 2.5 9.6 15.2 Johnson Matthey 10.8 9.3 16.4 17.6 19.1 14.4 1.9 1.8 10.5 12.5 LANXESS 9.7 8.3 13.4 14.8 20.9 16.7 1.7 1.6 8.0 8.5 BASF 11.3 9.0 11.7 14.1 23.6 16.6 1.7 1.7 2.0 8.9 Indorama ventures 13.5 10.3 9.5 11.1 41.9 19.4 1.6 1.5 3.4 8.2 SABIC 17.5 11.2 17.1 23.1 657.0 33.9 1.9 1.9 0.3 4.9 Honam Petrochemical 9.1 5.0 9.5 14.5 36.3 10.2 0.7 0.7 2.0 7.2 Eastman Chemical Co 11.3 10.1 20.7 21.8 17.9 14.7 2.3 2.2 11.8 14.6 AKZO Nobel 12.8 11.5 16.3 17.3 23.1 19.6 2.7 2.6 10.3 12.8 Global (ex Asia) peers average 11.9 9.4 15.2 17.7 85.5 19.0 2.0 1.9 6.5 10.5 Asian peers Mitsubishi Gas Chem 9.8 7.8 11.1 12.8 21.8 14.7 1.1 1.0 4.8 7.2 Sinopec Shanghai Petrochemical 33.7 9.2 1.3 4.2 NM 8.9 0.6 0.5 -0.9 4.9 LG Chem 16.4 12.8 15.6 15.6 51.6 33.7 4.0 3.6 7.9 11.0 Formosa Chemicals & Fibre Corp 15.7 14.3 13.0 12.2 26.8 19.0 1.5 1.4 4.7 6.6 Nan Ya Plastics 17.8 16.3 13.0 12.7 27.3 17.7 1.6 1.5 6.4 8.7 Formosa Plastics 23.0 17.3 13.0 15.4 29.6 16.3 1.7 1.6 5.7 10.3 Hanw ha 11.4 10.0 14.2 13.9 18.6 14.6 1.5 1.4 8.4 10.1 Asahi Kasei Corp 8.0 7.4 13.2 13.8 17.3 14.8 1.1 1.1 6.6 7.7 Toray Industries 11.1 8.9 10.0 11.4 31.8 17.4 1.0 1.0 2.8 6.1 Kuraray Co 5.7 5.1 19.1 20.3 29.3 14.5 0.7 0.7 2.8 5.3 Teijin Ltd 5.9 5.8 13.2 12.9 14.3 12.0 0.9 0.9 6.7 7.3 Mitsui Chemicals 7.5 6.2 11.5 12.8 16.6 11.8 1.1 1.0 6.5 8.7 RIL 18.0 12.9 16.5 18.3 31.0 21.9 2.3 2.1 8.1 10.1 Asian peers average 14.2 10.3 12.7 13.6 26.3 16.7 1.5 1.4 5.4 8.0 Global peers average 13.2 9.9 13.6 15.3 54.6 19.0 1.8 1.7 5.1 9.3 Global peers median 11.3 9.2 13.2 14.5 26.8 16.7 1.6 1.5 6.4 8.6 Source: JM Financial, Bloomberg
JM Financial Institutional Securities Limited Page 10 Reliance Industries 23 January 2021
Exhibit 18.Global refiner’s valuation snapshot EV/EBITDA (x) EBITDA Margins (%) P/E (x) P/B (x) ROE (%) Company FY21CY20 FY22CY21 FY21CY20 FY22CY21 FY21CY20 FY22CY21 FY21CY20 FY22CY21 FY21CY20 FY22CY21 US peers Holly Corporation 20.3 9.7 3.2 5.5 NM NM 0.9 1.0 -4.7 1.2 Valero Energy 35.5 10.6 1.5 4.1 NM 110.0 1.4 1.6 -6.6 1.1 US peers average 27.9 10.2 2.3 4.8 NM 110.0 1.2 1.3 -5.7 1.1 European peers Galp Energia 7.3 5.5 13.2 14.1 162.8 16.5 2.0 2.0 0.7 11.8 Motor Oil Hellas 6.5 5.8 6.0 5.9 11.0 8.2 1.3 1.3 11.5 15.4 New Zealand Refining 9.5 5.7 19.1 31.0 NM NM 0.3 0.3 -7.5 -4.0 PKN Orlen 5.6 4.9 9.2 8.9 9.5 8.3 0.6 0.6 6.8 7.5 Saras 96.2 6.7 0.2 2.5 NM NM 0.6 0.6 -14.6 -5.3 MOL Hungarian oil & gas plc 5.8 4.9 13.5 13.5 35.5 10.5 1.4 1.4 1.2 5.7 OMV Ag 6.0 4.3 21.2 23.0 16.9 10.2 0.9 0.9 3.2 8.9 European peers average 19.5 5.4 11.8 14.1 47.2 10.7 1.0 1.0 0.2 5.7 Asian peers GS Holdings 5.4 7.0 7.6 10.5 5.0 7.1 0.4 0.4 8.2 5.1 SK Energy Co Ltd 15.1 17.2 -3.1 5.2 38.9 97.6 1.6 1.6 -12.6 1.8 MRPL 27.9 7.4 2.4 5.6 NM 10.2 1.0 0.9 -3.9 9.3 CPCL 5.8 8.3 8.1 4.0 NM 7.1 0.9 0.8 30.3 19.3 BPCL 9.7 8.8 7.0 6.2 11.3 9.7 2.0 1.8 18.4 18.2 HPCL 5.2 5.0 5.5 4.8 5.6 5.5 1.0 0.9 18.9 13.6 IOCL 6.3 5.2 7.8 7.5 7.0 6.0 0.9 0.8 11.9 10.1 RIL 18.0 12.9 16.5 18.3 31.0 21.9 2.3 2.1 8.1 10.1 Asian peers average 11.7 9.9 5.4 7.5 16.5 29.2 1.3 1.2 7.4 9.9 Global peers average 16.8 8.2 7.5 9.8 30.4 28.4 1.2 1.1 3.2 7.3 Global peers median 7.3 6.8 7.3 6.0 11.3 10.2 1.0 0.9 2.2 8.2 Source: JM Financial, Bloomberg
JM Financial Institutional Securities Limited Page 11 Reliance Industries 23 January 2021 Financial Tables (Consolidated)
Income Statement (INR mn) Balance Sheet (INR mn) Y/E March FY19A FY20A FY21E FY22E FY23E Y/E March FY19A FY20A FY21E FY22E FY23E Net Sales 5,692,090 5,967,430 4,922,651 6,428,703 7,233,779 Shareholders’ Fund 3,871,120 4,533,310 5,856,228 6,798,843 7,493,490 Sales Growth 45.3% 4.8% -17.5% 30.6% 12.5% Share Capital 59,260 63,390 64,447 67,616 67,616 Other Operating Income 0 0 0 0 0 Reserves & Surplus 3,811,860 4,469,920 5,791,782 6,731,227 7,425,874 Total Revenue 5,692,090 5,967,430 4,922,651 6,428,703 7,233,779 Preference Share Capital 0 0 0 0 0 Cost of Goods Sold/Op. Exp 3,944,870 4,052,400 3,342,905 4,365,644 4,912,360 Minority Interest 82,800 80,160 266,461 349,886 454,935 Personnel Cost 124,880 140,750 147,788 155,177 162,936 Total Loans 2,719,420 2,914,170 1,615,565 1,088,934 986,428 Other Expenses 780,670 892,110 621,436 730,575 714,823 Def. Tax Liab. / Assets (-) 451,470 512,230 512,230 540,443 576,818 EBITDA 841,670 882,170 810,522 1,177,307 1,443,660 Total - Equity & Liab. 7,124,810 8,039,870 8,250,483 8,778,107 9,511,671 EBITDA Margin 14.8% 14.8% 16.5% 18.3% 20.0% Net Fixed Assets 5,778,370 6,417,640 6,432,555 6,763,033 7,083,366 EBITDA Growth 31.2% 4.8% -8.1% 45.3% 22.6% Gross Fixed Assets 5,847,100 7,429,350 7,755,328 8,410,163 9,090,292 Depn. & Amort. 209,340 222,030 282,910 318,877 354,425 Intangible Assets 119,970 102,590 102,590 102,590 102,590 EBIT 632,330 660,140 527,613 858,430 1,089,235 Less: Depn. & Amort. 1,983,330 2,205,360 2,488,270 2,807,146 3,161,571 Other Income 83,860 139,560 154,198 153,857 158,450 Capital WIP 1,794,630 1,091,060 1,062,907 1,057,426 1,052,054 Finance Cost 164,950 220,270 180,492 85,980 60,814 Investments 2,356,350 2,767,670 2,306,690 2,333,301 2,401,160 PBT before Excep. & Forex 551,240 579,430 501,318 926,307 1,186,870 Current Assets 1,841,580 2,444,840 2,860,211 3,136,527 3,487,216 Excep. & Forex Inc./Loss(-) 0 -44,440 49,660 0 0 Inventories 675,610 739,030 712,726 867,862 931,888 PBT 551,240 534,990 550,978 926,307 1,186,870 Sundry Debtors 300,890 196,560 226,120 281,305 308,059 Taxes 153,900 137,260 17,353 246,912 313,423 Cash & Bank Balances 110,810 309,200 724,160 784,763 1,035,865 Extraordinary Inc./Loss(-) 0 0 0 0 0 Loans & Advances 59,970 224,010 202,805 207,352 213,712 Assoc. Profit/Min. Int.(-) -1,030 -1,070 43,103 88,088 113,178 Other Current Assets 694,300 976,040 994,400 995,245 997,692 Reported Net Profit 398,370 398,800 490,523 591,307 760,268 Current Liab. & Prov. 2,851,490 3,590,280 3,348,973 3,454,754 3,460,071 Adjusted Net Profit 398,370 443,240 440,863 591,307 760,268 Current Liabilities 1,083,090 967,990 761,761 993,379 1,078,932 Net Margin 7.0% 7.4% 9.0% 9.2% 10.5% Provisions & Others 1,768,400 2,622,290 2,587,212 2,461,375 2,381,139 Diluted Share Cap. (mn) 5,926.0 6,339.0 6,444.7 6,761.6 6,761.6 Net Current Assets -1,009,910 -1,145,440 -488,762 -318,227 27,145 Diluted EPS (INR) 67.2 69.9 68.4 87.5 112.4 Total – Assets 7,124,810 8,039,870 8,250,483 8,778,107 9,511,671 Diluted EPS Growth 10.4% 4.0% -2.2% 27.8% 28.6% Source: Company, JM Financial Total Dividend + Tax 46,410 49,650 45,113 54,093 74,378 Dividend Per Share (INR) 6.5 6.5 7.0 8.0 11.0 Source: Company, JM Financial
Cash Flow Statement (INR mn) Dupont Analysis Y/E March FY19A FY20A FY21E FY22E FY23E Y/E March FY19A FY20A FY21E FY22E FY23E Profit before Tax 551,240 534,990 550,979 926,307 1,186,870 Net Margin 7.0% 7.4% 9.0% 9.2% 10.5% Depn. & Amort. 209,340 222,030 282,910 318,877 354,425 Asset Turnover (x) 0.9 0.8 0.6 0.7 0.8 Net Interest Exp. / Inc. (-) 110,380 114,530 26,295 -67,877 -97,635 Leverage Factor (x) 1.9 1.8 1.6 1.4 1.3 Inc (-) / Dec in WCap. -287,820 219,040 -209,485 21,297 -5,228 Others -37,770 -25,990 0 0 0 RoE 11.7% 10.5% 8.5% 9.3% 10.6%
Taxes Paid -121,910 -83,860 -17,353 -218,699 -277,048 Operating Cash Flow 423,460 980,740 633,345 979,905 1,161,384 Key Ratios Capex -936,260 -765,170 -297,825 -649,354 -674,758 Y/E March FY19A FY20A FY21E FY22E FY23E Free Cash Flow -512,800 215,570 335,520 330,551 486,626 BV/Share (INR) 653.2 715.1 908.7 1,005.5 1,108.2 Inc (-) / Dec in Investments -38,210 -17,110 463,825 -32,004 -76,665 ROIC 11.2% 11.3% 11.2% 12.8% 15.1% Others 29,400 25,340 154,198 153,857 158,450 ROE 11.7% 10.5% 8.5% 9.3% 10.6% Investing Cash Flow -945,070 -756,940 320,198 -527,502 -592,973 Net Debt/Equity (x) 0.5 0.4 -0.1 -0.2 -0.2 Inc / Dec (-) in Capital 2,320 1,300 1,020,706 400,738 626 P/E (x) 28.5 27.4 28.0 21.9 17.0 Dividend + Tax thereon 0 0 0 0 0 P/B (x) 2.9 2.7 2.1 1.9 1.7 Inc / Dec (-) in Loans 864,560 355,810 -1,333,684 -652,467 -182,742 EV/EBITDA (x) 17.7 16.9 15.7 10.4 8.2 Others -307,820 -382,520 -225,605 -140,073 -135,192 EV/Sales (x) 2.6 2.5 2.6 1.9 1.6 Financing Cash Flow 559,060 -25,410 -538,583 -391,801 -317,308 Debtor days 19 12 17 16 16 Inc / Dec (-) in Cash 37,450 198,390 414,960 60,603 251,103 Inventory days 43 45 53 49 47 Opening Cash Balance 73,360 110,810 309,200 724,160 784,763 Creditor days 82 69 68 69 68 Closing Cash Balance 110,810 309,200 724,160 784,763 1,035,865 Source: Company, JM Financial Source: Company, JM Financial
JM Financial Institutional Securities Limited Page 12 Reliance Industries 23 January 2021
History of Earnings Estimate and Target Price Recommendation History Date Recommendation Target Price % Chg.
22-Apr-19 Buy 1,400
22-Jul-19 Buy 1,390 -0.7 23-Sep-19 Buy 1,400 0.7 21-Oct-19 Buy 1,550 10.7 20-Jan-20 Buy 1,700 9.7 4-May-20 Buy 1,750 2.9 30-Jul-20 Buy 2,500 42.8 31-Jul-20 Buy 2,500 0.0 11-Oct-20 Buy 2,500 0.0 31-Oct-20 Buy 2,500 0.0
JM Financial Institutional Securities Limited Page 13 Reliance Industries 23 January 2021 APPENDIX I
JM Financial Institutional Securities Limited Corporate Identity Number: U67100MH2017PLC296081 Member of BSE Ltd., National Stock Exchange of India Ltd. and Metropolitan Stock Exchange of India Ltd. SEBI Registration Nos.: Stock Broker - INZ000163434, Research Analyst – INH000000610 Registered Office: 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India. Board: +9122 6630 3030 | Fax: +91 22 6630 3488 | Email: [email protected] | www.jmfl.com Compliance Officer: Mr. Sunny Shah | Tel: +91 22 6630 3383 | Email: [email protected]
Definition of ratings Rating Meaning Buy Total expected returns of more than 10% for large-cap stocks* and REITs and more than 15% for all other stocks, over the next twelve months. Total expected return includes dividend yields. Hold Price expected to move in the range of 10% downside to 10% upside from the current market price for large-cap* stocks and REITs and in the range of 10% downside to 15% upside from the current market price for all other stocks, over the next twelve months. Sell Price expected to move downwards by more than 10% from the current market price over the next twelve months. * Large-cap stocks refer to securities with market capitalisation in excess of INR200bn. REIT refers to Real Estate Investment Trusts.
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The Research Analyst(s), with respect to each issuer and its securities covered by them in this research report, certify that:
All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their securities; and
No part of his or her or their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research report.
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The Research Analyst(s) principally responsible for the preparation of this research report and members of their household are prohibited from buying or selling debt or equity securities, including but not limited to any option, right, warrant, future, long or short position issued by company(ies) covered under this report. The Research Analyst(s) principally responsible for the preparation of this research report or their relatives (as defined under SEBI (Research Analysts) Regulations, 2014); (a) do not have any financial interest in the company(ies) covered under this report or (b) did not receive any compensation from the company(ies) covered under this report, or from any third party, in connection with this report or (c) do not have any other material conflict of interest at the time of publication of this report. Research Analyst(s) are not serving as an officer, director or employee of the company(ies) covered under this report.
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JM Financial Institutional Securities Limited Page 14 Reliance Industries 23 January 2021 report is provided for information only and is not an investment advice and must not alone be taken as the basis for an investment decision.
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