Reliance Industries Ltd. shares fell as brokerages expect the renewed surge in Covid-19 cases to impact the company's key businesses in the near term.
The Mukesh Ambani-owned conglomerate reported a sequential rise of 24.9% and 1% in consolidated sales and net profit, respectively, in the quarter-ended March. Its legacy oil-to-chemicals segment's revenue and Ebitda rose 20.6% and 16.9% sequentially.
- Reliance Retail saw a 22.8% increase in net profit over the preceding three months, while its revenue jumped 24.4% to Rs 47,064 crore.
- Net profit of Jio Platforms Ltd., the holding company for the group's digital ventures and telecom unit, rose 0.54% over the previous quarter to Rs 3,508 crore.
Shares of RIL dropped as much as 2.5%—the most since April 12—but pared some of the losses to trade 2% lower as of 11:30 a.m.
Of the 36 analysts tracking the stock, 24 have a ‘buy' rating, seven suggest a hold' and five recommend a ‘sell', according to Bloomberg data. The average of the 12-month consensus price target implies an upside of 12.4%.
Here's what brokerages have to say about RIL's fourth-quarter results...
Nomura
- Maintains ‘buy' rating with a target price of Rs 2,400 apiece.
- The recent surge in the Covid-19 pandemic would impact key businesses. But the near-term weakness does not weaken the medium-term outlook.
- Bottom line weaker due to lower other income (increased yields, lower mark-to-market gains, forex loss, etc.), higher depreciation, and tax provision.
- Oil-to-chemicals segment earnings improved due to multi-year high prices of polymers and improving polyester chain margins.
- With regional Singapore complex margins on a recovery trend, Reliance would have likely realised GRM of $6-6.5 per barrel (it does not report refining GRM separately now).
- Reliance Jio's outlook remains strong with continued market share gains, the ramp-up of fibre-to-the-home/enterprise, tie-ups with strategic investors, in-house 5G capabilities, and increased spectrum footprint.
- Record high revenue in grocery and fashion/lifestyle segment helped retail arm. The consumer electronics received a boost from Jio device sales.
Jefferies
- Reiterates ‘buy' but cuts target price to Rs 2,580 from Rs 2,600 apiece.
- Contribution of Jio and retail to Ebitda increased to 53% from 37% YoY.
- Jio's performance was robust with 1.5 crore net subscriber additions and positive free cash flow in FY21 despite Rs 15,000-crore spectrum outflow.
- Accelerated store additions and progress on the new commerce initiatives helped Reliance Retail report in-line numbers.
- Net debt remained flat quarter-on-quarter. There was a reduction of Rs 1.23 lakh crore of net debt along with reduction of Rs 90,000 crore of other liabilities in 2020-21.
- Reduces consolidated EPS estimates by 2% for FY22 to factor in Covid impact.
Emkay
- Rates ‘hold' with a target price of Rs 2,060 apiece.
- O2C margins were driven by recovering demand sentiment, lower inventories, plant shutdowns, container shortages, optimised feedstock sourcing, and possibly inventory gains.
- Retail revenue jumped 25% QoQ, driven by electronics (including JioPhone), grocery, and fashion & lifestyle.
- Management sounded near-term Covid worries in retail though overall outlook otherwise is optimistic.
- R-Cluster touched a peak of 12.8 million standard cubic metre per day in April, while Satellite Cluster also started output in April which can ramp up to 5-6 mmscmd. RIL expects a 60% rise in gas price ceiling in the second half of 2021-22.
- Jio revenue declined 6% QoQ, while Ebitda margin expanded 388 basis points to 52%. Net access charges fell 88% to Rs 180 crore.
- FY23 Ebitda estimates remain unchanged due to expected Jio tariff hikes from the second half of 2021-22.
Motilal Oswal
- Reiterates ‘buy' with a target price of Rs 2,195 apiece.
- The consolidated debt has remained high at Rs 2,57,400 crore due to a sharp rise in non-current and current assets. The company has cash and equivalents at Rs 2,20,500 crore.
- In the oil and gas segment, it exited the loss-making Marcellus U.S. Shale assets.
- Production meant for sale stood at 16.6 mmt — translating to Ebitda/mt of $84.1 in 4QFY21 (up from $71.9 in 3QFY21).
- Reliance Jio aims to accelerate growth on the back of an addressable market of 30 crore feature phone subscribers, its foray into enterprise services, and venture into new digital avenues.
- Reliance Retail's net revenues/Ebitda grew 21%/42% YoY supported by all-time high revenues from grocery, fashion and lifestyle, and new commerce.
- Lowers O2C FY22/FY23 Ebitda estimates by 5% due to the second Covid wave in India that could impact demand/margins in the first half of 2021-22.
ICICI Securities
- Maintains ‘hold' with a target price of Rs 1,994 apiece.
- The recurring EPS was up 8% YoY driven by a rise in retail and digital services Ebitda, also supported by a sharp fall in tax.
- Petrochemicals and retail were the bright spots in the fourth quarter.
- Retail may lose momentum due to Covid second wave, while petrochemicals may be hit by large capacity additions in the second half of 2021-22.
- Lowers FY22 EPS estimates by 6% mainly on cut in other income and digital services Ebitda.
- Stronger net subscriber additions, tariff hike, retail growth back to pre-Covid levels, GRM recovery are key to stock performance.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
