Mukesh Ambani’s Reliance Industries Ltd (RIL) was down in the red on Monday as investors reacted to the company’s April-June quarter results.
Mukesh Ambani’s Reliance Industries Ltd (RIL) was down in the red on Monday as investors reacted to the company’s April-June quarter results. RIL reported a net profit at Rs 12,273 crore in the first quarter of the financial year, down 7.25% on-year basis even though revenue of the company rose 58.2% to reach Rs 1.44 lakh crore, as compared to Rs 91,238 crore in the same period a year. The oil-to-telecom conglomerate was trading at Rs 2,086 per share, down 0.86% on Monday. The stock has gained 5% so far this year, adding to its 97% rally since the end of March 2020.
During the April-June quarter, Reliance Industries reported an EBITDA of Rs 27,550 crore, up 27.6% from the same period last year. Retail and Telecom, the two new-age businesses that the company has recently focused, on reported a strong performance during the quarter. Whole Jio Platforms net profit stood at Rs 3,651 crore, up 45% during the quarter, Reliance Retail’s net profit came in at Rs 962 crore, up 123% on-year basis. Asserting its dominance in the retail space, RIL now has 12,803 operational physical stores across the country.
Motilal Oswal – Buy
Target price – Rs 2,485 (18%)
Analysts at Motilal Oswal are bullish on the stock seeing an 18% upside from current levels. “Using SoTP, we value the O2C business at 7.5x FY23E EV/EBITDA, arriving at a valuation of INR776/share for the standalone business, and assign INR68 for its E&P assets. We ascribe an equity valuation of a) INR875/share to RJio at 20x FY23E EV/EBITDA and b) INR771/share to Reliance Retail at 34x FY23E EV/EBITDA, factoring in the recent stake sale,” they said. Going ahead, the brokerage firm expects opportunities from the digital and fibre landscape along with a tariff hike to help Jio propel RIL further. The retail unit also commands premium multiples from Motilal Oswal analysts who factor in an aggressive rollout of the JioMart platform.
Kotak Securities – Add
Fair value – Rs 2,260 (7%)
The brokerage firm said that RIL’s results were in line with their expectations as better-than-expected delivery by O2C, Jio and upstream businesses, was offset by a significant Covid-related impact on the retail segment. Diving deep into Jio’s performance, Kotak Securities said that Jio’s net subscriber additions were fairly strong at 14.3 million despite covid-related restrictions with ARPU remaining steady. Kotak Securities has raised FY2022-24 consolidated EPS estimates by 3-4% factoring in April-June quarter performance, higher other income, lower finance cost and D&A. “We retain ADD noting a robust earnings growth trajectory, while revising our SoTP-based Fair Value to Rs2,260 from Rs2,200 earlier on rollover to September 2023E,” they added.
ICICI Securities -Hold
Target price – Rs 2,017
ICICI Securities said GRM weakness, falling petrochemical margin, and a third covid wave delaying retail recovery may mean more downside to the financial year 2022 EPS. “Stock underperformance continues and will continue unless there is a tariff hike, retail growth is back to pre-covid levels, or GRM recovers,” they added. The brokerage firm said that RIL’s petrochemical margins are already down from the peak and large capacity additions in products that account for 70% of its volumes may mean further correction. RIL has underperformed the Nifty 50 year-to-date.
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