Reliance gains 2% post September quarter results; brokerages remain upbeat

EBITDA increased by 30.2 per cent YoY to Rs 44,867 crore, on account of strong net subscriber addition and sharp increase in data traffic supported 80 bps margin improvements in Jio Platforms (JPL).

Shares of Reliance Industries (RIL) traded 2 per cent higher at Rs 2,310.10 on the BSE in Monday’s intra-day trade in an otherwise volatile market after the company reported a 27.4 per cent year-on-year (YoY) growth in its consolidated net profit at Rs 17,394 crore for the September quarter (Q2FY24). Mukesh Ambani-led RIL announced its quarterly results on Friday after market hours. In comparison, the S&P BSE Sensex was up 0.09 per cent at 63,841 at 10:31 AM.

While revenue growth of the company was flattish YoY at Rs 2.32 trillion, the profit rose on the back of operational improvement across most segments, especially higher profits in the O2C (oil-to-chemicals) and oil & gas businesses, as well as the retail business.

“Strong operational and financial contribution from all business segments has helped Reliance deliver another quarter of robust growth,” said Mukesh Ambani, chairman and managing director of the company.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 30.2 per cent YoY to Rs 44,867 crore, on account of strong net subscriber addition and sharp increase in data traffic supported 80 bps margin improvement in Jio Platforms (JPL).

Operating leverage and continued focus on cost management initiatives resulted in 80 bps expansion in Reliance Retail Venture (RRVL) to 8.4 per cent, while sustained performance in the O2C segment with strong domestic demand, optimized feedstock cost and strength in gasoline and PVC margins, the company said.

The better gas price realization and 66 per cent growth in KGD6 volumes improved Oil & Gas segment earnings. However, EBITDA margin was lower due to higher costs related to commissioning and ramp-up of MJ field and decommissioning of Tapti field, RIL said.

Overall, Petchem deltas (PP, PE and polyester delta) continued to remain subdued due to weak global demand. The impact was partially offset by higher domestic demand and 46 per cent correction in Ethane prices. GRMs on the other hand are expected to remain strong due to planned and unplanned refinery shutdown and tight market inspite of lower demand, ICICI Securities said in a note.

The brokerage firm believes that that the levers of premiumisation are limited for Jio in wireless currently and tariff hike is key for growth. The key positive, however, is 5G rollout as 5G has been deployed in over 1.5 lakh sites and is progressing well with >70mn subs. 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 the postpaid offerings (by new plan launches) where it currently lags incumbents.

Segment-wise, the Consumer business continues to post double-digit EBITDA growth with both RJio and Reliance Retail likely to record 15 per cent/30 per cent EBITDA CAGR over FY23-25. The growth would be driven by retail sector’s footprint additions and new categories, while the telecom business continues to focus on subscriber growth, according to Motilal Oswal Financial Services (MOFSL).

In O2C, the brokerage firm sees refining and petchem segments margins picking up from the current levels as net capacity additions for both segments are tapering off on a YoY basis in CY24. Further, FY25 would see the full benefit from the ramped up volumes at MJ field, MOFSL said in result update.