Q1 Results: What Brokerages Made Of Reliance Industries’ Performance

Most analysts cut target price for Reliance Industries Ltd. as lower refining margin and sluggish petrochemicals business weighed on the nation’s most valuable company. Yet, they maintained their investment recommendation on stock.

The company’s consolidated net profit rose during the June quarter meeting estimates, driven by higher other income and lower other expenses. Its gross refining margin fell during the period but higher volumes aided the segment. The revenue from the petrochemicals business, however, fell on lower volumes.

On the other hand, operating and net profit of Reliance Jio Infocomm Ltd.—the telecom venture of Mukesh Ambani—were aided by the adoption of IND AS-116—a new accounting standard—capitalisation of fibre use cost and a decline in other costs.

Here’s what brokerages have to say about Reliance Industries and Reliance Jio’s first-quarter numbers:

Bank of America Merrill Lynch On RIL

• Maintains ‘Buy’ and hikes target price to Rs 1,560 from Rs 1,515 apiece.
• First quarter beat estimates across division; hikes FY21/22 earnings per share estimates by 2-3 percent.
• Retail revenue growth continued to surprise despite seasonally slow quarter.
• Expects clarity on fibre-to-home launch date in the company’s annual general meeting.

Jefferies On RIL

• Maintains ‘Underperform’ with a target price of Rs 990 apiece.
• Noisy first quarter with a slew of adjustments marring earnings before interest, tax, depreciation and amortisation.
• Core performance was soft, with lower refining margins, petchem volumes, and telecom average revenue per user.

UBS On RIL

• Maintains ‘Buy’ with a target price of Rs 1,500 apiece.
• Reliance performed in tough environment yet again.
• Timing of tower InvIT positive for deleveraging.
• Reliance maintained an upbeat outlook on expansion in refining margins.

Credit Suisse On RIL

• Maintains ‘Neutral’ with a target price of Rs 1,350 apiece.
• Sharp decline in Reliance Jio’s ARPU and core retail growth moderates.
• Ebitda beat largely driven by Reliance Jio’s accounting based on IND AS-116.
• Petrochemical margin suppressed as both polyester and polymers are weak.

BoB Capital Markets On RIL

• Maintains ‘Add’ but cuts target price to Rs 1,335 from Rs 1,510 apiece.
• Uncertainty on cyclicals raises concerns on RIL’s earnings outlook.
• Petchem earnings lagged estimates as production declined on demand concerns.
• Refining margins were in line, guidance on impact due to International Maritime Organization’s new regulations mandating use of cleaner fuel seems unclear.

Antique Broking On RIL

• Maintains ‘Hold’ with a target price of Rs 1,245 apiece.
• Refining: weaker margin environment weighs on segment earnings.
• Petrochemicals: margin expands amid tough market conditions.
• Reliance Retail continues to grow, shrugging off slowdown among fast-moving consumer goods makers.
• Reliance Jio: subscriber base grows, ARPU declines on addition of JioPhone users.

Prabhudas Lilladher On RIL

• Maintains ‘Accumulate’ but cuts target price to Rs 1,363 from Rs 1,406 apiece.
• Lower refining and petrochemicals profitability drag standalone Ebitda.
• Profitability to get a boost from higher gross refining margin and commercialisation of petcoke gasification project.
• Cuts estimates for FY20/21 by 10/9 percent.

Centrum On RIL

• Maintains ‘Buy’ and cuts target price to Rs 1,430 from Rs 1,450 apiece.
• Resilient earnings despite challenging macro environment.
• Refining and petchem — a muted quarter.
• Lower refinery operating expenditure and outperformance by Reliance Jio and Retail segments supported earnings.

Equirus Capital On RIL

• Maintains ‘Add’ but cuts target price to Rs 1,398 from Rs 1,458 apiece.
• Investment by Brookfield to reduce InvIT debt.
• Gross refining margin continues to slide; lower volumes hit petchem performance.
• Digital and retail segments — picking up pace.

Edelweiss On RIL

• Maintains ‘Buy’ but cuts target price to Rs 1,652 from Rs 1,701 apiece.
• Refining on the path to recovery; petchem remains weak.
• Investments in telecom/media remain elevated.
• Lowers refining and petchem earnings leading to a 4.5 percent cut in FY20 EPS.

Edelweiss on Reliance Jio

• Tower and fibre InViT payouts dent Ebitda margin.
• Expects Reliance Jio to start raising prices from fourth quarter to improve return ratios.
• Reliance Jio continues to focus on subscriber acquisition and user engagement.