Reliance Industries Ltd.'s oil-to-chemicals and Jio Infocomm showed promising advancements, while Reliance Retail fell short of expectations. However, there was a notable improvement in the balance sheet and a decrease in net debt, aided by capital raise and asset divestitures, according to brokerages. Net profit for the Mukesh Ambani-led conglomerate rose 8.2% sequentially to Rs 21,243 crore for the January–March period of financial year 2024.
RIL's operating performance single-handedly benefited from a strong O2C performance, supported by availability of all units, quarter-on-quarter surge in gasoline cracks and improved polymer deltas, Centrum Broking said in a note.
Jefferies India Pvt. forecasts a 14% Ebitda growth in the current financial year with Jio contributing lion's share on the back of a tariff hike. "We raise FY25-26 revenue and Ebitda estimates for Jio by 1-4% and raise equity valuation to $39 billion as we raise our valuation multiple to 11.5 times EV/Ebitda in line with Bharti (Airtel)," the research firm said on Tuesday.
RIL Q4 FY24 Earnings Highlights (QoQ)
Revenue rose 5.6% to Rs 2.37 lakh crore from Rs 2.28 lakh crore (Bloomberg estimate: Rs 2.4 lakh crore).
Operating profit was up 4.6% to Rs 42,516 crore from Rs 40,656 crore (Bloomberg estimate: Rs 42,423 crore).
Operating margin came in at 18% vs 18.06% in the previous quarter (Bloomberg estimate: 17.9%).
Board recommended a dividend of Rs 10 per share.
Strong demand for fuels globally and limited flexibility in refining system worldwide has supported margin and profitability of the O2C segment, according to Mukesh Ambani, chairperson of RIL. However, the downstream chemical industry experienced increasingly challenging market conditions through the year, he said.
Here's what brokerages say about Reliance Industries Q4 results:
Jefferies
Jefferies maintains 'buy' on RIL and hiked the target price to Rs 3,380 from Rs 3,140 apiece, implying a potential upside of 14.9% from the previous close.
Jio was ahead on higher average revenue per user due to improved subscriber mix. The oil-to-chemical profitability rose on robust refining, while petrochemical was subdued.
Peak capital expenditure appears behind, free cash flow improved and net debt fell 6% year-on-year.
The profit beat was driven by higher-than-expected ARPU on improving business mix. However, Jio's FCF turned negative on capex creditors reduction and the returns on capital employed remained at sub-6% levels, 5G is gaining healthy traction and Jio will focus on growing this and homes business in fiscal 2025.
Retail growth was soft, but the balance sheet improved.
Capex rose year-on-year, positive FCF and net debt reduction.
Forecasts 14% Ebitda growth in fiscal 2025.
Raise Ebitda estimates for Jio by 1–4%
CLSA
CLSA has lowered RIL's s earnings per share estimates by 2–5%.
The brokerage downgraded the oil-to-telecom stocks to 'outperform' from a 'buy' rating, citing limited upside after the recent rally.
However, it raised the target price on the stock to Rs 3,300 apiece from Rs 3,060 apiece.
RIL's management highlighted that 30% of traffic on its network under 5G is not yet being monetised.
This, along with tariff hike, ramp-up in wireless broadband subs and possible listing of Jio and/or retail are potential triggers for the stock.
Goldman Sachs
Goldman Sachs reiterates 'buy rating' and raises the price target to Rs 3,435 from Rs 3,400 apiece.
The research firm expects stronger catalysts, including a potential telecom tariff hike in the second half of 2024, stronger same-store sales growth in retail and potential value unlocked through a listing of consumer and telecom units.
Potential start of a new energy giga complex in the second half of 2024.
Goldman Sachs sees potential value unlock through a listing of consumer (Jio/Retail) businesses.
Risk-reward remains favourable with a 50% upside in Goldman Sachs' bull-case scenario and 14% downside in the bear-case scenario.
JPMorgan
The research firm maintains an 'overweight' rating on the stock with a target price of Rs 3,100 apiece.
Growth in fiscal 2025 should come from organic growth in Reliance's consumer businesses (Retail hopefully regaining high double-digit revenue growth) and telecom (with potential for tariff increases post elections).
The company is currently spending $10 billion on new petchem capacities and another $10 billion on creating new renewable/solar capacities, which should also help growth over the coming years.
The decline in capex and net debt is a positive.
Nuvama Institutional Equities
Nuvama maintains 'buy' on RIL, raises target price by 10% to Rs 3,500 apiece.
RIL is smartly nearing its new energy vision rollout, bagging several PLIs on the way.
Reliance Retail registered strong footfalls of 272 million, up 24% year-on-year. It recorded over 311 million transactions in the fourth quarter, up 6% year-on-year.
During the quarter, Reliance Retail acquired the India business of Kiko Milano and intellectual property, including trademarks and recipe of sugar-boiled confectionery from Ravalgaon.
Raises FY26 Ebitda by 8% on strong outlook.
Macquarie Equity Research
Macquarie Equity Research maintained 'neutral' rating and raised the target price to Rs 2,630 per share.
The research firm raised FY25E/26E earning per share estimates by 1%/2%, respectively.
Tariff hike led by Jio to monetise 5G user base, progress on spinoffs of Jio/Retail, capex discipline and FCF improvement.
Upside risks: higher multiples applied to Jio and Retail, new energy divisions to reflect the longer-term optionality, take sale in O2C and new energy at premium valuations and much stronger earnings growth delivery.
Downside: Lack of earnings follow-through.
Shares of the company rose as much as 0.92% to the highest level since April 2, before falling 0.2% at 09:52 a.m. This compares to a 0.23% advance in the NSE Nifty 50.
The stock has risen 14.43% on a year-to-date basis and 34.64% in the last 12 months. Total traded volume so far in the day stood at 0.33 times its 30-day average. The relative strength index was at 54.22.
Of the 36 analysts tracking the company, 29 maintain a 'buy' rating, five recommend a 'hold,' and two suggest 'sell', according to Bloomberg data. The average 12-month analysts' price target implies an upside of 6.7%.
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