Analyst reviews of
’s March quarter numbers reflected lack of consensus on future earnings, with target prices varying from as low as Rs 1,350 to as high as Rs 2,580.
The Mukesh Ambani-led conglomerate delivered a mixed bag on Friday, with profit growth failing to meet analyst estimates on lower other incomes.
Analysts, however, found the recovery in RIL’s retail segment better than expected, but said June quarter could be hit by the Covid second wave.
Jio’s numbers, they said, were largely in line as higher net additions offset lower average revenue per user (Arpu). In the case of the O2C business, earnings improved, as gas production from the KG basin ramped up fast.
ETMarkets.comICICI Securities said petrochemicals and retail were the bright spots in RIL’s March quarter earnings, but retail may lose momentum due to Covid second wave while petrochemicals may be hit by large capacity additions in H2FY22.
ETMarkets.comThe brokerage said regaining momentum in subscriber addition, tariff hikes, recovery in retail growth to pre-Covid levels, stake sale in the O2C business and recovery in GRM would be key to stock performance going forward.
Noting that the scrip has underperformed the broader market since September 2020, the brokerage has retained a ‘Hold’ rating on the stock with a price target of Rs 2,033.
On Monday, the stock fell over 2% to Rs 1,950 as of 10 am (IST).
Nomura India said Reliance Industries’ Ebitda was better for all key segments and met expectations, but lower other incomes and higher depreciation and tax provisions weakened the bottom line.
“We see the maximum impact of Covid on retail (footfalls declined to 35-40 per cent of pre- pandemic levels). We see relatively lower impact in O2C (lower demand will likely be offset by higher margins). In Jio, while we do not see much impact on subscriber growth, the expected tariff hike could get pushed by a few months to H2FY22. In our view, near-term weakness does not weaken the medium-term outlook. We expect 33 per cent earnings CAGR over FY20 to FY23F,” it said and suggested a price target of Rs 2,400 for the stock.
ETMarkets.comNomura set a target of Rs 2,400 for the stock. Jefferies has maintained ‘buy’ rating on the scrip with a price target of Rs 2,580. It said the numbers were below estimates despite strong showing by Jio and retail businesses.
Macquarie has the lowest target at Rs 1,350, as it sees downside risks to earnings estimates.
The oil-to-telecom major reported a 129 per cent year-on-year rise in its consolidated net profit for the quarter ended March to Rs 14,995 crore.
RIL’s telecom and digital services arm Jio Platforms posted a 0.5 per cent quarter-on-quarter rise in consolidated net profit at Rs 3,508 crore.
Retail revenues increased 20 per cent on-year to an all-time high of Rs 41,296 crore as more stores were able to re-open during the quarter due to the easing of Covid-19 restrictions. The revenues of the oil-to-chemical business rose 5 per cent year-on-year to Rs 1.01 lakh crore aided by the low base of the year-ago quarter.
Edelweiss argued that RIL’s FAANG-like valuation, particularly RJio’s, is misplaced as O2C and telecom make up 70 per cent of value. It noted that following 33 per cent stake sale, RJio’s profit attributable to RIL fell 3 per cent YoY against standalone RJio growth of 44 per cent YoY. Similarly, 10 per cent stake sale in retail diluted standalone growth of 45 per cent to 30 per cent attributable to RIL.
“While consumer-facing, RJio and retail optically contribute to half of RIL’s Ebitda, it falls to only 31 per cent at attributable consolidated PAT level,” Edelweiss said.
JP Morgan said March quarter was a miss for RIL, and said it sees meaningful downside risks to earnings. The brokerage said the management commentary was cautious given the second Covid wave and said Jio numbers were disappointing. This brokerage has maintained a ‘neutral’ stance on the stock with a target of Rs 2,055.
Credit Suisse said there was a strong rebound in Retail & O2C businesses and that Jio Ebitda now fully reflects price increase benefit. It has a ‘neutral’ rating on the stock with a price target of Rs 1,930.
