Reliance Industries Q4 Results Review - Standalone Businesses Fuel Operating Performance: Motilal Oswal

Motilal Oswal Report

Segment-wise, Reliance Industries Ltd.'s consumer business continues to post double-digit Ebitda growth, with both RJio and Reliance Retail likely to record 14% and 25% Ebitda compound annual growth rate over FY24-26, respectively.

The growth would be driven by footprint additions, new categories in the retail sector, the focused approach to subscriber growth, and the expected tariff hikes in the telecom business. In oil-to-chemical, we see refining and petchem segments picking up from the current levels, as net capacity additions for both segments are tapering off on a YoY basis. Moreover, FY25 would witness the full benefit of the ramped-up volumes at the MJ Field.

We value Reliance Retail’s core business at 40 times enterprise value/Ebitda on FY26E and connectivity at five times to arrive at our valuation of Rs 1,812.

Reliance Retail’s value in RIL share comes to Rs 1,593 (for its 87.9% stake). Our premium valuation multiples capture the opportunity for rapid expansion in its retail business and the aggressive rollouts of the digital platforms.

We are factoring in 12%/14% revenue/Ebitda CAGR during FY24-26. RJio is valued at an EV/Ebitda multiple of 12 times on FY26E Ebitda. The potential tariff hikes, market share gains from Vodafone Idea Ltd., and opportunities in digital offer an option value of Rs 120, thereby arriving at a valuation of Rs 810/share (adjusted for its 66% stake).

Overall, we remain positive on both the refining and petrochemical segments. Global oil demand for CY24 is likely to be at 103 million barrels of oil per day (up 1.2 mnbopd YoY).

Gasoil cracks are anticipated to remain firm due to the strength in jet fuel demand and the limited availability of heavy crude.

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