RIL, Reliance Industries results: Most brokerages have cut earnings estimates for Reliance Industries (RIL) after the oil-to-telecom conglomerate’s quarterly results missed Street expectations, yet again, in the the July-September quarter (Q2) for financial year 2024-25 (FY25).
“O2C is facing headwinds with weak gross refining margin (GRM) benchmarks and regional petrochem margins. Meanwhile, the benefit of the last tariff hike will continue to flow through the year, while another round of tariff hike is expected next year, likely ahead of our forecast. Retail consolidation, however, is likely to keep near-term growth down,” said analysts at Antique Stock Broking.
Reliance Q2 results
On Monday, Reliance Industries reported Q2FY25 Ebitda decline of 4.7 per cent Y-o-Y, lower than consensus estimate of Rs 40,400 crore, with O2C and telecom short of expectations, even as retail and oil & gas were in-line. Ebitda is earnings before interest, tax, depreciation and amortisation.
Its consolidated net profit (attributable to owners) fell 4.8 per cent year-on-year (Y-o-Y) to Rs 16,563 crore, missing analysts’ consensus expectations of Rs 17,200 crore. RIL’s consolidated revenue came in at Rs 2.31 trillion, missing the consensus estimate of Rs 2.34 trillion.
According to Bloomberg analysis, RIL has seen de-growth in net profit for a third straight quarter. Besides, this was the sixth quarter in a row when the firm missed brokerages’ forecast.
Weaker spreads for transport fuels and muted petrochemical spreads quarter-on-quarter (Q-o-Q) led to segmental Ebitda decline of 5 per cent, and 24 per cent Y-o-Y — weakest since Q3FY23.
“Demand scenario for refining business has turned bearish over the last couple of months along with petrochemical margins; overall O2C prospects remain tepid for the next 12-18 months,” pointed out ICICI Securities in a note.
Jio Platforms, on the other hand, saw an 18 per cent Y-o-Y surge in revenue; but retail business’ revenue from operations dropped 3.5 per cent Y-o-Y.
According to analysts, Reliance Retail’s consolidated net revenue missed estimates due to weaker demand in the fashion and lifestyle category, coupled with continued rationalisation of smaller/unprofitable stores.
Going ahead, Motilal Oswal Financial Services anticipates RJio to be the biggest driver of Ebitda growth over FY24-27, driven by more frequent tariff hikes, market share gains in wireless, and the ramp-up of its Homes and Enterprise business.
RIL stock outlook
Motilal Oswal has cut its FY25 consolidated Ebitda estimate by 2 per cent and FY26 by 1 per cent. It has trimmed consolidated net profit estimates by 6 per cent and 3 per cent for the respective years. Stock target price stands cut to Rs 3,255 from Rs 3,410.
Antique Broking, too, has cut Ebitda estimates for FY25 by 3.6 per cent, FY26 by 3.5 per cent, and FY27 by 3.3 per cent. It has cut RIL share price to Rs 2,846 per share from Rs 3,194 per share while maintaining a ‘Hold’ rating.
By comparison, the BSE Sensex has dropped 4.2 per cent during the period.
Analysts predict that the near-term disappointment in retail and weak O2C will likely hold back the stock performance.
“We cut our earnings per share (EPS) estimates for FY25-FY27 by 3.3-9.5 per cent, largely on weaker spreads in the O2C segment and slow momentum in the retail segment partly offsetting higher earnings in the telecoms business. We expect the new energy ramp-up to be gradual as technologies take time to mature, which will likely keep the stock range-bound in the near-term,” said global brokerage HSBC.
It, however, has increased its target price to Rs 3,010 from Rs 2,780 on the back of comfortable valuations. It has maintained its ‘Hold’ rating.
First Published: Oct 15 2024 | 11:08 AM IST
