RIL dips 3% in intraday trade on weaker-than-expected Q1FY24 results

The company reported a 10.8% year-on-year dip in its consolidated net profit to Rs 16,011 crore owing to weak profitability seen in the O2C business

Shares of Reliance Industries dipped 3 per cent to Rs 2,469.55 on the BSE in Monday's intra-day trade as investors booked profit in the company after it reported lower-than-expected June quarter results (Q1FY24), with a 10.8 per cent year-on-year (YoY) dip in its consolidated net profit of Rs 16,011 crore owing to weak profitability seen in the oil-to-chemicals (O2C) business.

In the past two trading days, the stock has declined 5 per cent. It had hit a record high of Rs 2,635.17 (adjusted to demerger of Jio Financial business) on July 19. The shares, however, recovered and were flat at 9:45 AM, as against 0.16 per cent dip in the S&P BSE Sensex.

In Q1FY24, RIL's revenue from operations was down 5.2 per cent YoY at Rs 2.07 trillion, which the management attributed to a sharp decline in the O2C revenues with a 31 per cent fall in crude oil prices. Ebitda (earnings before interest, tax, depreciation and amortisation) for the quarter, the company said, was Rs 41,982 crore, up 5.1 per cent.

In a Bloomberg poll, seven analysts estimated adjusted net income at Rs 16,995 crore and 14 expected the company’s revenue to be around Rs 2.137 trillion.

While the stock has been on an uptrend since its March lows, gaining 25 per cent during the period, as much as half of those gains have come in just the last three weeks.

"Segment wise, the consumer business has been a mixed bag with retail seeing moderate growth but likely to witness gains from the Future group footprint. Growth in telecom will continue to soften with higher base and lower probability of tariff hikes in the near term as well as intensifying 5G spends. While upstream production is projected to increase to 30mmscmd in the coming monthsfrom 20.9mmscmd in 1QFY24, concerns remain on refining and petrochem margins going forward," Motilal Oswal Financial Services said in a result update report.

Although O2C net revenues de-grew 18 per cent YoY to Rs 1.33 trillion (due to lower crude oil prices and lower product realisation, volumes were flat), its Ebitda de-grew 23 per cent YoY to Rs 15,271 crore, led by fall in product cracks and petchem realisation, but came above consensus estimates of Rs 14,200 – Rs 14,400 crore, ICICI Securities said in a note.

On a QoQ basis, while the estimated gross refining mrgins (GRMs) were down by $3 levels to $12 per barrel, Petchem realisation saw some improvement, Going ahead, we expect GRMs to improve in H2 on the back of greater uptake by the Chinese refineries, the brokerage firm added.

Over the long term, Reliance Retail's widespread physical store network would further enhance its omni-channel capabilities (~20 per cent of revenues) and position it as a frontrunner to garner consistent business growth by capturing a larger pie of the Indian retail sector opportunity, ICICI Securities said.

As regards to Reliance Jio, the brokerage firm said the company continues to see 5G as medium to long term enabler of higher data usage and APRU driver along with its dedicated efforts to catch up on postpaid offerings (by new plan launches) where it currently lags incumbents. Nonetheless, the subscriber addition focus is also at lower end through Jio Bharat (and ARPU dilutive). Furthermore, it highlighted its intent to aggressively expand broadband coverage further through fixed wireless access ahead.