RIL FY24 Annual Report - Earnings Growth Slows, RE Investments The Key Focus Over FY25-27E: ICICI Securities

ICICI Securities Report

The FY24 annual report of Reliance Industries Ltd. throws up some interesting data points:

1. No let-up in capex intensity, despite expectation of some moderation (cash capex of Rs 1.5 trillion in FY24, an Rs 119 billion over FY23, a new high).

2. Net debt (including spectrum and other deferred payment liabilities) remained flattish at Rs 3.04 trillion YoY, despite a material Rs 1.65 trillion in operating cash flow in the year.

3. Net working capital (excluding cash) increased by Rs 119 billion (over FY22-24), driven by a sharp uptick in inventories.

4. Free cash flow generation remains elusive, despite sharply higher profitability – FCF yield of 0.2% versus an average negative yield of 1.1% over FY21-23.

We introduce FY27E earnings per share of Rs 139.2 with this note, a rollover to FY27E multiples and some reduction in net debt drives a revision in target price to Rs 2,970 (from Rs 2,954). Reiterate Hold.

Upside Key risks

Stronger oil-to-chemical margin, lower capex, stronger average revenue per user growth in RJio, and faster-than estimated execution on green energy plans

Downside Key risks

Weaker OTC margins, slower growth in retail, delay in execution of new energy business.

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