Reliance shares rose half a per cent to Rs 2,454 on NSE after the Mukesh Ambani-led company reported in-line Q3 numbers. The oil-to-telecom major’s net profit declined 15% on-year to Rs 15,792 crore for the quarter ended 31 December 2022. RIL’s telecom arm Reliance Jio and retail arm Reliance Retail each posted healthy double-digit growth in revenues on-year as more consumers used their services. Jio increased its revenue by 18.87% on-year to Rs 22,998 crore in Q3FY23, while Reliance Retail Ventures clocked a 17% on-year jump in revenue from operations at Rs 67,634 crore in the quarter. RIL board also approved raising Rs 20,000 crore through non-convertible debentures (NCDs). So far this year, RIL share price has tumbled more than 5%. However, the stock has rallied 172% in last five years.
Should you buy, hold or sell Reliance shares?
Emkay Global: Buy
Target price: Rs 2,750
The brokerage values RIL on an SOTP basis with core segments using EV/EBITDA and upstream, new energy, and other segments using DCF (+30% premium)/EV-IC/EV-Sales. “We retain our multiples for various segments, except retail. We have built in Rs 1.2-1.3 lakh crore annual capex run rate due to which our net debt estimate has increased. We roll over from Sep-24 to Mar-25,” it said. Analysts at Emkay Global maintain a ‘Buy’ rating on RIL shares on reasonable valuations. Adverse commodity/currency, B2C competition, policy, and new business among the key risks.
Nuvama: Buy
Target price: Rs 3,205
According to analysts at Nuvama Institutional Equities, RIL’s Q3FY23 EBITDA of Rs 35,300 crore (+19% YoY), beat consensus by 5%. O2C. The brokerage expects gross revenue margins (GRMs) to stay lofty on strong middle distillate cracks, albeit below CY23. Windfall tax will remain a near-term earnings drag. “We reiterate our ‘Golden Era of Refining’ thesis, yielding >USD10GRMs CY24 onwards. Upstream to nearly match retail FY24E EBITDA, given steep gas prices and further KG-D6 ramp-up,” it said, adding that RIL’s new energy rollout shall unleash its next leg of growth, besides aiding conventional business. The brokerage retained ‘buy’ rating on Reliance shares with an unchanged target price of Rs 3,205 apiece.
Prabhudas Lilladher: Buy
Target price: Rs 2,894
Prabhudas Lilladher in its first cut note stated that the earnings beat lead by higher O2C realizations and 2x growth in the O&G segment. The brokerage said, “RIL reported Q3 results with standalone EBIDTA & PAT of Rs 15,030 crore respectively. Higher finance and depreciation charges drag PAT. O2C EBIDTA was at Rs 12,110 crore. Gas EBIDTA was at Rs 3,800 crore. The gas realization was at $11.3./mmbtu vs $9.86 in Q3 while volume was at 18.8mmscmd.” It reiterated the ‘Buy’ call on the stock with a target price of Rs 2,894 per share.
Motilal Oswal: Buy
Target price: Rs 2,800
The brokerage house revised its capex estimates for FY23 and FY24 to Rs 1,700 billion and Rs 1,000 billion from Rs 1,650 billion and Rs 750 billion, respectively. Using SOTP, analysts at Motilal Oswal Financial Services Lrd value the refining and petrochemical segment at 7.5x on 24 December EV/EBITDA to arrive at a valuation of Rs 879/share for the standalone business. It ascribed an equity valuation of Rs 809/share to Jio and Rs 1,270/share to Reliance Retail, factoring in the recent stake sale. The brokerage reiterated ‘buy’ rating on the stock with an SoTP-based target price of Rs 2,800 apiece.
According to Abhijeet Bora, DVP, Research at Sharekhan by BNP Paribas, RIL’s Q3FY23 consolidated EBITDA was broadly in-line with estimates as strong performance from retail/Jio was largely offset by a miss in standalone EBITDA. Bora said, “Although standalone EBITDA grew strongly by 25% on-quarter to Rs 15,034 crore but was below our estimate due to weak margin for petchem and light distillate petroleum product cracks along with SAED impact of Rs1,898 crore in Q3FY23. The consolidated PAT at Rs 15,792 crore was 9% below our estimate due to higher depreciation/interest cost and tax rate of 23%.” Sharekhan’s analyst has given a ‘Buy’ rating to RIL shares.
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