Shares of Mukesh Ambani-owned oil-to-chemicals-to-telecom conglomerate Reliance Industries Limited (RIL) tanked 3 per cent to hit an intraday low of Rs 2,542 on BSE after the company posted its earnings for the quarter ended March 2022.
The company posted a consolidated profit after tax (PAT) at Rs 16,203 crore, up 22.5 per cent in the quarter March 2022 following strong performance across its energy, telecom and retail verticals. It had posted a net profit of Rs 13,227 crore in the year-ago period.
RIL's revenue from operations stood at Rs 2,11,887 crore from Rs 1,54,896 crore in the same quarter last fiscal. It is now the first Indian corporate to cross $100 billion in sales revenues.
The stock opened lower at Rs 2,575 against the previous close of Rs 2621.15 on BSE. With a market capitalisation of more than Rs 17,00,000 crore, the shares stand higher than 50 day, 100 day and 200 day moving averages but lower than 5 day and 20 day moving averages.
Brokerage house Motilal Oswal noted that RIL’s consolidated gross debt increased to Rs 2,663 billion at end-4QFY22 (from Rs 2,447 billion and Rs 2,518 billion at end-3QFY22 and FY21, respectively), with cash and cash equivalents at Rs 2,315 billion. Net debt was at Rs 348 billion (as per management).
Commenting on the gas prices, it said that the GoI has already raised the gas price ceiling to USD9.92/mmBtu for 1HFY23. Considering the current high gas price environment, the management believes that the subsequent revision in-ceiling would be even higher.
Motilal Oswal added that a short-term impact is expected due to high gas prices but the outlook remains positive for RIL with growth in pipeline infrastructure and CGD networks. Thus, sustained high production and improved realization would result in better profitability in the segment in near future.
"We value the Refining and Petrochemical segment at FY24E EV/EBITDA of 7.5x, arriving at a valuation of Rs 728/share for standalone business. We ascribe an equity valuation of Rs 1,007/share to RJio and Rs 1,276/share to Reliance Retail, factoring in the recent stake sale. Our higher EV/EBITDA multiples of 38x for Retail (core segment) and 19x for Digital Services underscore new growth opportunities in the Digital space and steady market share gains. We reiterate BUY with a target price of Rs 2,935," it said.
HDFC Securities noted that the company reported lower than expected numbers. We use EV/EBITDA to value downstream at Mar-24E EV/e, retail on peer benchmarked EV/e and E&P and Jio on DCF and maintain 'Add' rating. The stock is currently trading at 11x Mar-24E EV/EBITDA and 19x Mar-24E EPS, it said.
"Our Add rating on Reliance Industries (RIL) with a price target of Rs 2,825 per share is premised on recovery in the oil-to-chemical (O2C) businesses; continued EBITDA growth in the digital business, driven by improvement in ARPU, subscriber addition, and new revenue streams; and potential for further value unlocking in the digital and retail businesses," it added.
Yes Securities pointed out that the numbers were broadly in‐line with street estimates. The strong YoY growth was primarily aided by exceptionally strong refining margins, stemming from sudden expansion in HSD crack spread as a fall out of Russia - Ukraine conflict. However, the same was offset partially by weaker petrochemical cracks.
Going ahead, it added that while the refining environment continues to be strong on the apprehension of supply disruption in refined products from Russia and China; the petrochemical environment appears weak primarily on tepid Chinese demand and firmer naphtha. Also, while telecom ARPUs could improve further in FY23, retail business could be impacted by the current inflationary environment.
"We value RIL at Rs 2840 per share, on an SOTP basis, implying a target P/E multiple of 22.4x FY24e, as against 21x the stock is currently trading at," it said.
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