Brokerages mostly have a ‘neutral’ rating on the stock, with the 12-month price targets in Rs 1,900-2,450 range.
Transparency levels are falling across businesses, said Edelweiss Securities, which noted that Reliance Industries has stopped reporting a key matrix — gross refining margin (GRM) — altogether. The brokerage noted that the company has ceased to provide a division-wise turnover breakup for retail, and that RJio’s key driver, FTTH, lacks granularity.
“Quality of profit suffers as RIL’s investment income of Rs 78o crore overshadows core earnings growth following cash infusions,” Edelweiss said while suggesting that consumer-facing businesses RJio and retail optically contribute about half of RIL’s Ebitda, but they contribute only 29 per cent to RIL’s overall consolidated profit after tax.
The stock fell 4.7 per cent to hit a low of Rs 1,953.40 on BSE.
JP Morgan has maintained a ‘neutral’ rating on the stock with a target of Rs 1,990. It said that Ebitda had a small miss across most segments and that Jio’s net subscriber addition missed estimates by a large margin even as average revenue per user beat estimates. Retail Ebitda excluding investment income was soft, it added.
“The miss was largely on energy business with standalone Ebitda, 12 per cent below our estimates. RIL has reorganised its reporting to combine the refining and petrochemical segments as a single O2C segment. With the changed reporting, it has not disclosed refining GRM, which makes quarterly comparisons difficult. Petchem was further strong sequentially. Thus, we believe that refining was likely weaker vs our GRM forecast of $6 a barrel,” Nomura India said. The brokerage has cut Reliance’s target to Rs 2,400 from Rs 2,450.
Credit Suisse has maintained a ‘neutral’ rating on the stock with a target of Rs 1,930 citing a weak quarter across Retail, O2C and Jio businesses. While suggesting a good ramp-up in JioMart and Fashion segments, it has cut its FY22 EPS estimate by 4 per cent and FY23 by 3 per cent. December quarter numbers were below expectations on lower retail sales, it said.
The gross refining margin (GRM) had stood at $5.7 per barrel for the September quarter.
Citi also maintained a neutral stance on the stock with a target of Rs 2,130. Pre-tax profit was flat on a year-on-year basis and 8 per cent ahead, aided by a sharp decline in interest costs, it said. Combined O2C EBitda at Rs 9,800 crore, up 10 per cent sequentially, was below expectations, the foreign brokerage said.
Goldman Sachs said it maintained a ‘buy’ rating on the stock with a target of Rs 2,390 as it expects core Ebitda growth of 59 per cent YoY in FY22E.
On a YoY basis, Reliance Industries reported a 12.5 per cent year-on-year rise in its consolidated net profit to Rs 13,101 crore, which was above analysts’ estimates. The oil-to-telecom conglomerate reported consolidated revenues of Rs 1.2 lakh crore, up 21.10 per cent year-on-year.
The weak topline performance of the company was attributable to the continued struggles of the refining business and retail business of the company due to the Covid-19 pandemic.
“We have delivered strong operational results during the quarter with a robust revival in O2C and retail segments, and a steady growth in our digital services business. I am proud that Reliance has employed 50,000 more people since March 2020,” Chairman and MD Mukesh Ambani said.
The revenues of the oil-to-chemical business, which contribute nearly two-thirds to the company’s topline, fell to Rs 83,838 crore in the reported quarter from Rs 1.19 lakh crore a year ago.
RIL’s refining business has suffered due to the impact of the Covid-19 pandemic on demand for transportation fuel, which occupies the maximum pace in the company’s refining slate.
Reliance Jio’s revenues rose nearly 6 per cent sequentially to Rs 18,492 crore due to increased data consumption on its network, given that majority of the formal sector is still working from home. Sales of the organised retail business of the company under Reliance Retail Venture fell nearly 10 per cent sequentially to Rs 33,018 crore in the quarter, reflecting the weakness in the retail operations due to localised restrictions.