RIL Q3 Results Review — Strong Retail, O2C Lifted Profits; Systematix Lowers Target Price But Maintains 'Buy'

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Systematix Report

Reliance Industries Ltd. delivered a robust performance in Q3 FY25 beats our Ebitda/PAT estimates by 5.5%/5.9% owing to a stronger-than-expected profit from the retail and oil-to-chemical businesses.

Jio Digital Services and retail sales outperformed jumping 16.7%/9.1% YoY (3.1%/16.7% QoQ) due to tariff hike, ramp up in home connections and festive season.

Reliance’s O2C segment showcased steady performance rising 2.4% YoY/16% QoQ due to higher gross refining margin and better PP/PVS spread, partially offset by weaker polyester chain cracks. KG D6 production remained flattish at 28 million metric standard cubic metre per day of gas and 21K bopd of oil/condensate versus 28.6/20.8kbopd QoQ.

Jio witnessed another healthy quarter as average revenue per user rose sharply by 11.9% YoY/4.2% QoQ to Rs 203.3 (our estimate Rs 205), tariff hike still remains to play out in coming quarters.

Subscriber base bounced back to its FY24 levels i.e. 482 million up 2.4%YoY/0.7% QoQ. Retail business benefitted from strong festive demand backed by 156 net store additions, showcasing revenue/sq.ft. of Rs 10,284 (+0.8%YoY/22.8% QoQ), taking total count to 19,102 stores resulting in Core Ebitda/store of Rs 3.5 million.

In O2C segment, better operational excellence and strong domestic volume demand helped to clock 17.9 mmt production (up 9.1% YoY) and Ebitda/mt of $95.2 (down 7.5% YoY/13.8% QoQ). Overall, Ebitda increased 7.7%/12.1% YoY/QoQ to Rs 438 billion.

Total capex dropped sequentially to Rs 323 billion in Q3 FY25 from Rs 340 billion (Rs 301 billion YoY) largely spent towards new energy and O2C. Total net debt declined to Rs 1.16 trillion versus Rs 1.19 trillion YoY. We retained our Buy on the stock with a revised target price of Rs 1,476 from earlier Rs 1,572 on the back of lower multiple to O2C given the weakness in GRM and petrochemical spreads.

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