RIL Earnings Meet Estimates; Analysts Expect Jio Growth and Rebound in Energy

Reliance Industries Ltd has garnered positive attention from brokerages due to promising growth in its telecom sector and an anticipated recovery in its energy division, as highlighted in its fiscal first-quarter earnings report.

Nomura has issued a ‘buy’ recommendation for Reliance Industries, setting a price target of ₹3,600, suggesting an approximate 16% increase from the recent closing price. Analysts at Nomura praised the performance of Reliance’s oil-to-chemicals (O2C) division, noting it had “delivered well in a challenging environment,” and highlighted a year-on-year margin improvement of 20 basis points.

On July 19, Reliance Industries announced a revenue increase of 11.5% to ₹2.58 lakh crore for the first quarter, driven by contributions from various segments. Consolidated EBITDA saw a 2% rise from the previous year, reaching ₹42,748 crore, despite a decline in the O2C business EBITDA. The company's capital expenditure for the quarter was ₹28,785 crore, comfortably offset by a cash profit of ₹33,757 crore.

Jefferies remarked that the O2C business results met expectations and noted that strong performance in the consumer and upstream sectors compensated for the weak O2C environment. In the consumer segment, Reliance's Jio also performed as expected, with Jefferies predicting robust growth following a tariff hike. 

Jio Platforms reported a 12.8% increase in revenue from operations, reaching ₹29,449 crore for the quarter ending June 30, with EBITDA rising to ₹14,638 crore. The average revenue per user (ARPU) was ₹181.7, attributed to an improved subscriber mix.

Jefferies and Morgan Stanley have given ‘buy’ and ‘overweight’ ratings on RIL shares, with price targets of ₹3,525 and ₹3,540, respectively. Morgan Stanley anticipates a rebound in the energy and telecom segments in the upcoming quarters.

Reliance’s retail segment reported a revenue growth of 6.6%, with EBITDA increasing to ₹5,664 crore. Jefferies noted the management's efforts to rationalize unprofitable retail operations to focus on margins, a strategy that Morgan Stanley highlighted as significant given the current weak domestic demand.

Macquarie has a ‘neutral’ stance on Reliance Industries, with a price target of ₹2,750 per share. They view the company's adherence to capital expenditure discipline and improvement in free cash flow as positive developments.

"Consolidated EBITDA for the quarter improved from a year ago with strong contribution from Consumer and Upstream businesses offsetting weak O2C operating environment," Mukesh D. Ambani, Chairman and Managing Director of Reliance Industries said. "Reliance’s resilient operating and financial performance in this quarter underscores the strength of its diverse portfolio of businesses. Importantly, these businesses are contributing significantly to India’s growth, providing vital energy and vibrant channels for digital and physical distribution of goods and services," he added.

"Retail business delivered robust financial results, as compared to last year, well supported by all consumption baskets. With fast-paced expansion of its retail footprint, Reliance Retail continues to cement its position as the preferred retailer for millions of Indians. The digital and new commerce segments are also scaling up rapidly," the Reliance Industries CMD said.