RIL Q2 Results Review - Reflect Weakness In Downstream Margins, Slower Retail Growth: ICICI Securities

ICICI Securities Report

Reliance Industries Ltd. has delivered second successive quarter of muted earnings, with 5/5% YoY decline in Ebitda/profit after tax (+1/9% QoQ). Weak oil-to-chemicals (-24/-5% YoY/QoQ dip in segment Ebitda) and muted retail (segment Ebitda up only 1/3% YoY/QoQ) segments drove this weakness.

Capex of Rs 340 billion was up Rs 52 billion QoQ, driven by New energy/oil-to-chemical capex, increasing net debt to Rs 1,164 billion (up Rs 41 billion QoQ).

New Energy segment and strong RJio prospects are positives, but we remain cautious on free cash flow yields/return ratios and rich valuations.

Despite EPS downgrade of 5-7% for FY25-27E, target price rises marginally to Rs 2,980/share, driven by upgrades to telecom valuations. Additionally, the 14% dip in stock price (over last three months) implies ~9% upside, driving an upgrade to Add.

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