RIL reported overall in-line results. Standalone Ebitda (-6% q-o-q) was 1% above our estimates. Due to lower interest/tax charges, standalone PAT (-1% q-o-q) was 8% above us. Consol PAT (+3% q-o-q) was 4% ahead of us and 8% ahead of Bloomberg consensus. For 9MFY20, RIL’s standalone PAT was up by a modest 6% y-o-y (mainly driven by lower tax), but consol PAT was up by a stronger 13% y-o-y, driven by both retail and Jio. We reiterate our Buy rating on RIL with a TP of `2,020 (implying 28% upside). The stock trades at 14.6x FY21F P/E and 10.1x FY21F EV/Ebitda.

Refining was ahead due to lower opex and higher volumes

Reported GRM of $9.2/bbl (vs $9.4 in Q2, our estimates $9.2) was in-line, but reported Ebit of `56 bn (+14% q-o-q) was 6% higher than our estimates. Key reasons for beat were marginally higher volume of 18.1mmt (+8% q-o-q, our est 17.9mmt) and lower opex. Premium over SG complex expanded to $7.5/bbl (vs $2.9 in Q2).

Petchem was much weakerPetchem Ebit of `58 bn declined 23%

q-o-q (vs our expectation of 15% decline). The weakness was driven by tepid demand and new capacity additions in both aromatic and polymer chains, and firmer feedstock naphtha/ethane prices. Near-term outlook appears weak for both polymer (new US crackers and export terminal) and aromatics chains (new PX capacity in China, PTA capacity overhang).

Jio weaker than our expectation, but outlook remains strong

Jio Ebitda of Rs 56 bn (up 9% q-o-q) was 8% below our estimates driven by lower subs and lower comparable ARPU. Reported PAT of `13.5 bn (up 36% q-o-q) was impacted by `1.8 bn of AGR (adjusted gross revenue) provisions, but was boosted by the adoption of a lower corporate tax rate. Gross subs adds at 37mn was strong; but, due to the elimination of 22mn subs (mainly extremely heavy voice users), net adds were 15mn lower to 370mn (our est of 377mn). While reported ARPU of `128 was in-line, we note that Jio has now started to account for inter-connect usage charges (IUC) as part of revenue, and restated prior period numbers. With continued market share gains, full impact of tariff hikes over the coming quarters, and ramp-up of FTTH/enterprise services, the outlook remains strong for Jio.

Retail: another strong quarter

Retail Ebitda of `27 bn (+17% q-o-q) was 7% ahead of our estimates. The retail segment continues to surprise with strong volume growth in core retail. As per management, growth is even stronger in Tier-2/3 towns. Retail Ebitda margins continued to expand. Overall retail margin (ex-GST) was 6.7% in Q3 (vs 6.3% in Q2).