Reliance Industries gains 1% post December quarter earnings

Shares of Reliance Industries (RIL) traded 1 per cent higher at Rs 2,460 on the BSE in Monday’s intra-day trade after the company’s October-December quarter (Q3FY23) performance came ahead of Street expectations.

At 09:49 am; RIL quoted 0.60 per cent higher at Rs 2,457.45, as compared to 0.72 per cent rise in the S&P BSE Sensex. The stock hit a low of Rs 2,431.15 after opening at Rs 2,450 on the BSE.

In recent past, RIL has underperformed the market. In past one month and six months, the stock was down 2 per cent on each count, as compared to 2 per cent and 9 per cent, rise in the S&P BSE Sensex, respectively. In past one year, RIL was down 1 per cent, as against 3.3 per cent gain in the benchmark index.

The Mukesh-Ambani-led RIL has cautioned against the impact of global economic headwinds on energy demand, in a post-results conference call. Pointing to growing slowdown concerns internationally, including rising interest rates and contracting purchasing manager's indices (PMIs), the company's management warned in its post-results call that these factors could hurt overall oil demand in the future. CLICK HERE FOR FULL REPORT

RIL’s results were better than estimates on the operational profitability front. Revenue was up 15.3 per cent year-on-year (YoY) to Rs 2.2 trillion as all major segments reported revenue growth. It de-grew 5.3 per cent quarter-on-quarter (QoQ) mainly due to a weak petchem performance, analysts at ICICI Securities said.

However, profit after tax (PAT) was lower than estimates at Rs 15,792 crore (I-direct estimate: Rs 17267.7 crore) due to higher-than-expected depreciation and interest. PAT de-grew 14.9 per cent YoY but was up 15.6 per cent QoQ.

According to brokerage firm RIL’s consumer business will be the growth driver, going ahead. Tariff hikes undertaken by Jio would be a key monitorable. O2C segment is likely to improve as higher middle distillate cracks would help strengthen GRMs along with a rebound in petchem demand.

Also read: Absence of immediate drivers puts Reliance Industries stock in back seat

Increment value accretion from the ‘digital ecosystem’ that will be captured at the Jio Platforms (JPL) level, steady FCF generation in the retail segment would enable the company to maintain debt at lower levels and improve its ability to invest in future inorganic opportunities are key triggers for future price performance, analysts said with ‘buy’ rating on RIL with 12-month target price of Rs 3,050 per share.

Analysts at JP Morgan said they remain OW on RIL and believe the recent underperformance is mostly flows driven (given continued FII sell down in India) even as the underlying earnings environment remains strong.

“We assume no tariff hike in FY24. Overall, we still see a healthy earnings environment for RIL, with the O2C, and E&P business benefitting from China reopening and higher volumes, and this supports our ‘overweight’ thesis,” the brokerage firm said.

“Our GRM forecast is well below spot level and we take conservative E&P volume assumptions. We do NOT see listings of the consumer business this year or any stake sale in the New Energy business,” it added.