Shares of India’s most valued company Reliance Industries (RIL) on Monday rallied over 5% to hit a fresh 52-week high of Rs 2,826 on Monday with its market capitalisation crossing the threshold of Rs 19 lakh crore.
RIL’s December quarter results were largely in-line with market expectations with its O2C EBITDA dropping 14% QoQ to Rs 140.6 billion due to maintenance in multiple units combined with lower cracks & deltas. Jio’s EBITDA was up 1.4% QoQ to Rs 142.6 billion, while Retail EBITDA rose 8% QoQ to Rs 62.7 billion.
RIL’s profit after tax stood at Rs 19,641 crore in Q3FY24, down 1.2% QoQ and up 10.3% YoY and above market expectations of Rs 18,080 crore. PAT margin came at 8.7% versus 8.6% in the previous quarter.
“We see this earnings report as a positive turning point to RIL’s investment cycle and expectations on energy profitability. RIL’s F3Q24 EBITDA (Rs405bn, down 0.7% QoQ) was a slight beat, 2% above our estimates, as better-than-expected gas production EBITDA more than negated the impact of fuel refinery maintenance,” Morgan Stanley said while giving a target price of Rs 2,821.
Analysts expect 2024 to be an eventful year for RIL as the past two years of investments move into the monetization phase. “We think investment cycles will be shorter than in the past two decades, with limited impact on balance sheet leverage,” the brokerage said, adding that a turn in the chemical cycle, a golden age for refining, traction in 5G subscribers, and a slowdown in investments in retail could be among key events that garner investor traction.
Jefferies, which has forecast 12% EBITDA growth in FY25 with Jio contributing lion’s share on the back of a tariff hike, has a target price of Rs 3,140.
Sharekhan has maintained a Buy rating on RIL saying that it is a compelling long-term investment bet given strong prospects across business and potential value unlocking from retail, digital services, and financial services portfolio.
Citi, on the other hand, has downgraded RIL to neutral as the risk-to-reward ratio is fairly balanced.
“We raise our FY24-26E EBITDA by 2-5% led by Jio (higher tariff hikes), retail (recent robust performance), and O2C (3Q beat). The stock’s recent outperformance, however, makes risk/reward more balanced, in our view, and we downgrade to Neutral with a Rs 2910 target price,” Citi said.
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