Reliance stock dips 3% post Q1 results; down 6% from record high

The market price of the country's most-valued-company in terms of market capitalisation was down 5% in past two trading days and slipped 6% from its record high level of Rs 3,217.90 touched on July 8.

Shares of Reliance Industries (RIL) dipped 3% to Rs 3,018.65 on the BSE in Monday’s intra-day trade after the company reported a 5.5 per cent year-on-year (YoY) decline in consolidated profit to Rs 15,138 crore for the April-June period of 2024-25 (Q1FY25). This, the company said, was a result of weakness in its oil-to-chemicals (O2C) division and higher depreciation costs, offsetting gains in the consumer (retail and telecom) and oil & gas upstream businesses.

The market price of the country’s most-valued-company in terms of market capitalisation was down 5 per cent in the past two trading days. It slipped 6 per cent from its record high level of Rs 3,217.90 touched on July 8. At 10:04 am; RIL was down 2.8 per cent, as compared to a marginal 0.03 per cent decline in the BSE Sensex. Thus far in the calendar year 2024, RIL has outperformed the market by gaining 17 per cent, as against nearly 12 per cent rise in the benchmark index.

 

RIL’s revenue for the quarter under review stood at Rs 2.32 trillion, up 11.7 per cent YoY, driven by higher oil prices and growth in consumer businesses. Consolidated profit before interest, depreciation, and taxes (PBIDT) saw a 2 per cent YoY growth, reaching Rs 42,749 crore.

RIL’s Q1FY25 earnings also missed Street estimates. In a Bloomberg poll, 13 analysts had estimated revenue of Rs 2.32 trillion and seven analysts estimated a net income (profit) adjusted of Rs 17,416 crore. EBITDA/PAT missed due to the standalone/retail segments, while all three segments drove revenue growth, according to analysts.

Segment-wise, the consumer business continues to post double-digit EBITDA growth, with both RJio and Reliance Retail likely to record 25 per cent and 19 per cent EBITDA CAGR over FY24-26, respectively. The growth would be driven by footprint additions, new categories in the retail sector, the focused approach to subscriber growth, and the tariff hikes in the telecom business, according to Motilal Oswal Financial Services.

In O2C, the brokerage firm sees Refining and Petchem segments picking up from the current levels, as net capacity additions for both segments are tapering off on a YoY basis. Moreover, FY25 would witness the full benefit of the ramped-up volumes at the MJ Field.

The MJ field represents the last of three major new deepwater developments the RIL-bp consortium have brought into production in block KG D6 off the east coast of India.

Analysts at Nomura trimmed FY25F/26F EBITDA by 3 per cent/2 per cent and introduce FY27F estimates. However, the global brokerage firm reiterated its 'Buy' rating on RIL with a higher SoTP-based target price of Rs 3,600 on rollover to Jun’26F.

“RIL is our top pick in the sector. We note the outlook across segments remains optimistic growth of consumer businesses remains robust for retail underpinned by store additions, strong growth of digital/ new commerce and operating leverage; and Jio’s tariff increase will lead to value creation and monetization of investments, enabling an improvement in FCF generation and return ratios; we note upside risks to our FY26F/FY27F average revenue per user (ARPU) growth estimates; RIL has a 7 per cent sensitivity to EBITDA if ARPU is 5 per cent higher than currently factored,” analysts at Nomura said.

O2C will benefit from sustained strong global oil demand growth of over 1mn b/d in CY24 and CY25, tight oil product markets and a likely recovery in petchem margins; upstream has ramped up strongly and will continue its strong performance in FY25F. 

RIL will further benefit from its robust FCF generation of Rs 28,300 crore in FY25F, declining capex levels to around Rs 1.25 trillion and declining debt levels to Rs 2.4 trillion. The upcoming AGM and commencement of new energy operations will be a key event for RIL in coming months, the brokerage firm said.