Reliance Industries, HUL, UltraTech, Supreme Industries, Metro Brand & More Q3 Results Review: HDFC Securities

HDFC Securities Institutional Equities

Reliance Industries - Growth in retail, Jio and oil and gas businesses

Our 'Add' rating on Reliance Industries Ltd. with a price target of Rs 2,740/share is premised on-

1. recovery in the oil-to-chemical businesses;

2. Ebitda growth in the digital business, driven by improvement in average revenue per user, subscriber addition, and new revenue streams; and

3. potential for further value unlocking in the digital and retail businesses.

RIL’s consolidated Ebitda at Rs 407 billion (+16% YoY; - 0.8% QoQ) and adjusted profit after tax at Rs 173 billion (+9% YoY; -0.7% QoQ) came in marginally above our estimates, supported by better performance from its retail, digital and O&G segments, partially offset by weak O2C segment performance.

HUL - Weak demand; recovery to be gradual

Hindustan Unilever Ltd. reported 2% underlying volume growth (in-line; four-year compound annual growth rate at 3%) while value growth was flat due to passing on of benefits of softening raw material to consumers.

The demand environment has remained challenging, witnessing only gradual recovery due to-

1. erratic monsoon, delayed winter;

2. subdued festive season; and

3. slower-than-expected recovery in rural.

Urban markets continued to grow ahead of rural while premium portfolio outperformance over mass has sustained (more than 2.5 times year-to-date-24).

Value growth will remain muted in the near term. While home care and beauty and personal care saw mid-single-digit volume growth, food and refreshment volumes declined in low-single digits.

Given the benign input cost environment, local competitive intensity continues to remain high. HUL continued to reinvest the benefits of gross margin expansion (~400 bps YoY) through-

1. higher advertising and promotion spending (up 33%);

2. capability building; and

3. an increase in royalty rate.

As a result, Ebitdam was up a modest 10bps at 23.3%. We model a gradual recovery in demand. We cut our FY24-26 EPS estimates by 2-3% and value the stock at 47 times P/E on Dec-25E EPS to derive a target price of Rs 2,550. Maintain 'Reduce'.

UltraTech Cement - Price and cost tailwinds bolster margin

We maintain 'Buy' on UltraTech Cement Ltd. with an unchanged target price of Rs 10,840 (16.5 times Mar-26E consolidated Ebitda).

We continue to like UltraTech Cement for its robust growth and margin outlook and balance sheet management.

During Q3 FY24, while volume growth slowed to 6% YoY, unit Ebitda recovered to a six-quarter high of Rs 1,191 per metric tonne driving consolidated revenue/Ebitda/adjusted profit after tax growth of 8/39/68% YoY.

Healthy price uptick and falling energy costs QoQ drove the same.

UltraTech Cement’s expansions are on track which will increase its capacity to Rs 190 million metric tonne by FY27 end (~10% CAGR during FY23-27E).

The company noted demand outlook remains healthy and its unit opex will continue to decline in Q4 FY24, benefitting from further energy cost reduction.

Metro Brands - Tough comparables weigh down performance

Revenue grew 6.1% YoY (on a high base) to Rs 6.4 billion (our estimate: Rs 6.8 billion). Products more than Rs 3,000 accounted for 49% of the mix in 9MFY24 versus 44% in 9MFY23. KPI (sales density, margins) normalisation continues, led by-

1. tough comparables versus base (Q3 FY23 comprised meaningful pent-up demand and higher wedding days) and

2. sales loss during World Cup weekends (per channel checks).

Ebitdam declined 296 bps YoY to 31.3% (our estimate: 32.4%), courtesy-

1. lower sales density; ergo weak fixed-cost absorption.

2. front-loading of expansion-led costs.

3. Store addition guidance on track (100 stores in FY24).

We marginally cut our FY25/26 earnings per share estimates by 2.3/1.5% and maintain our 'Sell' rating on the stock with a discounted cash flow-based target price of Rs 870/share, implying 45 times March-26E price/equity.

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