Reliance Industries (RIL) share price fell more than 2 percent in the early trade on May 3 even after the oil-to-telecom major on April 30 reported a consolidated net profit of Rs 13,227 crore for the quarter ended March 2021 (Q4FY21), up 108.4 percent year-on-year amid significant growth in Jio and recovery in retail segments.
Consolidated revenue from operations stood at Rs 1,54,896 crore, up 11 percent YoY, while the sequential increase in topline was at 24.9 percent.
The oil-to-chemical (O2C) business revenue grew by 20.6 percent sequentially to Rs 1,01,080 crore.
Jio Platforms recorded a 47.5 percent year-on-year (half a percent QoQ) growth in consolidated profit at Rs 3,508 crore and Reliance Retail's net profit for the quarter was Rs 2,247 crore, up 45 percent YoY and 23 percent QoQ.
The company also announced a dividend of Rs 7 per share.
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Here is what brokerages have to say about the stock and company after the March earnings:
Sharekhan | Rating: Buy | Target: Rs 2,400
We maintain our FY2022-FY2023 earnings estimates as we expect strong earnings recovery led by higher downstream margins (especially petrochemical side) and sustained strong performance by consumer-centric business (retail and Jio led by the ramp-up of new revenue streams - home and enterprise broadband, and expansion of new commerce initiative).
Overall, we expect RIL’s PAT to clock a strong 30 percent CAGR over FY2021-FY2023E. Potential carving out of the O2C segment as a separate wholly-owned subsidiary (NCLT approval expected by Q2FY2022) is a key near-term catalyst for RIL. The move will facilitate strategic partnership with global players and drive value unlocking for RIL.
Prabhudas Lilladher | Rating: Buy | Target: Rs 2,256
We increase our FY22/23E EBIDTA estimates by around 3 percent to factor in faster E&P volume ramp up but higher depreciation and other minor changes lead to EPS cut of 2 percent and 6 percent, respectively. Recovering global economy aided by expanding vaccination coverage will help drive demand (albeit near-term challenges in domestic market) and augur well for RIL’s all business segments.
With stated intention to monetise and forge global partnership across businesses, RIL is well positioned to incubate new business and pursue inorganic opportunities, given its liquid balance sheet. We believe positive news flow on global partnerships or stake sale will likely keep valuations at an elevated level.
Motilal Oswal | Rating: Buy | Target: Rs 2,195
Using SOTP, we value the O2C business at FY23E EV/EBITDA of 7.5x, arriving at a valuation of Rs 713 a share for the standalone business and add Rs 61 for the E&P assets.
We ascribe an equity valuation of a) Rs 755 a share to RJio on FY23E 18x EV/EBITDA and b) Rs 670 a share to Reliance Retail on FY23E 31x EV/EBITDA, factoring in the recent stake sale.
Morgan Stanley | Rating: Overweight | Target: Rs 2,262
The multi-year upcycle in refining and petrochemicals will raise investor confidence. The recovery in telecom nets adds and a rise in gas production will raise investor confidence.
The FY20-23 earnings CAGR seen at 23 percent, while asset monetization and e-commerce ramp-up should also drive outperformance.
Credit Suisse | Rating: Neutral | Target: Rs 1,930
There was a strong rebound in retail, O2C, and Jio EBITDA now fully reflects price increase benefit outlook. However, weak retail in Q1FY22 as footfalls are 35 percent of pre-COVID.
Jio EBITDA growth will depend on subscriber addition till further price hikes. Lift FY22/FY23 EPS estimate by 3 percent to build in strong O2C spread.
Nomura | Rating: Buy | Target: Rs 2,400
The Q4 was good operationally, with the key beat on retail. On the energy front, the O2C earnings recover further, while Jio was largely in line, with higher net adds offsetting lower ARPU. However, there was a better-than-expected recovery in retail.
Jefferies | Rating: Buy | Target: Rs 2,580
The Q4 EBITDA rose 7 percent YoY, driven by Jio and retail. Jio's 3x sequential jump in net subscriber additions and positive FY21 were the key highlights.
The net debt was flat QoQ and Jio turning FCF positive lowers our FY22 net debt estimate. Cut FY22 EPS estimate by 2 percent but kept FY23 broadly unchanged.
Macquarie | Rating: Underperform | Target: Rs 1,350
O2C margin and Jio subs additions were the better things from the results, while Jio ARPU compression was a miss. The consensus now estimates core EPS to rise 50 percent by FY23 versus our forecast of 10 percent.
At 0920 hours, Reliance Industries was quoting at Rs 1,957.20, down Rs 37.25, or 1.87 percent, on the BSE. The share touched a 52-week high of Rs 2,368.80 on September 16, 2020, and a 52-week low of Rs 1,393.65 on May 20, 2020. It is trading 17.38 percent below its 52-week high and 40.44 percent above its 52-week low.
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