RIL Q1 results: O2C recovery drives broadly in-line quarter, says Equirus Securities

Equirus Securities in its flash note on Reliance Industries Ltd (RIL) said the oil-to-telecom major delivered a broadly in-line quarter, with consolidated Ebitda coming in 3 per cent below its estimate but 4 per cent ahead of consensus. The brokerage said the quarter was led by a sharp recovery in the oil-to-chemicals (O2C) business, while Jio maintained momentum and the upstream business improved sequentially. The brokerage said its 'LONG' rating and Rs 1,586 target price on the stock is under review.

According to Equirus, stronger middle-distillate cracks, robust petrochemical spreads and favourable crude sourcing lifted O2C Ebitda per metric tonne by 24 per cent quarter-on-quarter to $115 per metric tonne. This was ahead of its expectation of $111 per metric tonne. However, lower volumes, down 7 per cent QoQ, capped overall segment Ebitda, which came in 10 per cent below its estimate.

The brokerage said Jio continued to execute well, helped by subscriber additions, modest average revenue per user improvement and record-high Ebitda margins. This reaffirmed the strength of the telecom franchise, Equirus said.

Equirus said the retail business' margin compressed to a 15-quarter low amid investments in scaling digital commerce. It added that the upstream business recovered sequentially after maintenance completion, though lower KG-D6 gas prices and volumes continued to weigh on earnings.

Overall, Equirus said RIL's quarterly recovery was supported by stronger O2C margins, continued momentum in Jio and a slight improvement in upstream, while the retail business remained under pressure.

RIL had on Friday reported a 22.40 per cent year-on-year (YoY) decline in consolidated net profit to Rs 20,946 crore for the June quarter from Rs 26,994 crore in the corresponding quarter last year. The oil-to-telecom major's bottom line was weighed down largely by lower other income, which fell to Rs 6,550 crore from Rs 15,119 crore a year ago. The year-ago figure included a Rs 8,924 crore gain from the sale of investments in Asian Paints.

Consolidated PAT on recurring basis came in at Rs  23,196 crore, up 6.1 per cent YoY. This was in line with flattish to single-digit growth estimate by analysts. 

The Mukesh Ambani-led firm reported 25.41 per cent YoY growth in net sales at Rs 3,11,850 crore for the first quarter compared with Rs 2,48,660 crore in the same quarter last year. Analysts estimated sales growth in 34-38 per cent range.