Brokerages delivered a mixed verdict on Reliance Industries' December-quarter performance, flagging weaker-than-expected earnings quality driven largely by the retail business, even as strength in energy, digital and telecom provided support.
Morgan Stanley maintained its 'overweight' rating on the stock with a target price of Rs 1,847, calling the results broadly in line, though with misses on quality. The brokerage flagged weak earnings quality, especially in retail, but said this was a “clearing event” and largely priced in. It added that catalysts in energy and artificial intelligence outweigh near-term volatility in retail growth. Morgan Stanley highlighted new energy execution and refining as positives, while pointing to weaker retail top-line growth and a rise in consolidated unallocated costs as negatives. Performance in digital, upstream oil, and oil-to-chemicals was in line with expectations.
Jefferies retained its 'buy' rating but cut its target price to Rs 1,795 from Rs 1,830, describing the quarter as soft with a retail hiccup. Consolidated EBITDA came in 5% below estimates, with retail Ebitda 4% lower and a more than threefold jump in unallocable expenses. Core retail growth slowed, with Ebitda rising just 2% year-on-year, impacted by promotions and heightened competition in the quarter. Jefferies noted that Jio's revenue and Ebitda were in line, as the company awaits government approval of a new IPO rule to move ahead. The oil-to-chemicals business was in line, with the brokerage constructive on the refining outlook. It said a revival in retail growth and a tariff hike in Jio are key triggers for the stock.
Macquarie reiterated its 'outperform' rating with a target price of Rs 1,650, noting that the December quarter saw lacklustre retail performance but robust Jio results. The brokerage flagged softness in retail and higher losses in the ‘Others' segment, adding that the quarter adds downside risk to Reliance's retail revenue ambition of doubling in four years. Macquarie also sees downside risk to overall consensus forecasts, estimating around 15% group EPS growth.
Reliance Industries Q3 Results (Consolidated, QoQ)
- Revenue up 4% at Rs 2.69 lakh crore versus Rs 2.59 lakh crore (Estimate: Rs 257038 crore)
- Ebitda up 0.3% at Rs 46,018 crore versus Rs 45,885 crore (Estimate: Rs 47,997 crore)
- Margin at 17.4% versus 18% (Estimate: 18.7%)
- Net profit up 2.6% at Rs 18,645 crore versus Rs 18,165 crore (Estimate: Rs 19,271 crore)
Read More: RIL Q3 Results: Profit Misses Estimates, Margin Contracts As Chemicals Weigh
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