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RIL performance in third quarter supported by performance of consumer businesses
Business, Equities, Market News, Markets - January 10, 2025

Reliance Industries Q2: Telecom and Retail Sectors Fuel Strong Growth Overview

Reliance Industries Q2: Telecom and Retail Sectors Fuel Strong Growth

Overview
Mukesh Ambani, a billionaire and India’s richest person, leads Reliance Industries, the country’s largest firm by market capitalization. However, RIL is not the only company led by Ambani that is listed on the stock exchange. Reliance Industrial Infrastructure Limited, a RIL-promoted firm, has declared its quarterly earnings for the October-December 2024 period.

Price History of RIIL
On Wednesday, shares of the Reliance Industries-backed company closed at Rs 1113 per on the BSE, down 2%. RIIL, with a market capitalization of Rs 1,680.63 crore, is a component of the S&P Smallcap Index. Reliance Industrial Infrastructure shares have fallen 20% in the last six months and 17% over the last year.
According to BSE statistics, the Reliance stock has increased by 22 percent in the last two years and 29.53 percent in the last three years and consequently, the shares of RIIL have surged by 142& in the last 5 years. Meanwhile, Ambani-led Reliance Industries is a promoter in the company, with 68,60,064 shares representing a 45.43 percent ownership.

Bernstein Report
Reliance Industries Limited will experience a recovery cycle following a bad year in 2024, according to Bernstein analysis. According to this analysis, RIL’s near-term growth drivers will include telecom, retail, and refining. In 2025, the recovery will be spearheaded by a 12% increase in Jio’s Average Revenue Per User (ARPU) without rate increases, as well as 4-5% user growth. Retail operations are also expected to improve, with double-digit EBITDA growth, providing strength to the RIL.

The research notes that the company’s current valuation of 10.1x projected EV/EBITDA is 17% lower than its three-year average. With earnings likely to climb by 19% or higher in FY26, Bernstein has upped its target price for RIL to Rs 1,520, representing a 25% upside.
According to the analysis, Reliance Jio would be a primary driver of RIL’s recovery, with revenue growth forecast at a CAGR of 17% over the next three years.

By FY26, ARPU is forecast to increase by more than 14%, and Jio’s subscriber base is expected to reach 500 million, resulting in a 48% revenue market share.
According to the study, Jio’s lower capital investment is further bolstering its profitability, which benefits RIL. According to the research, RIL’s retail business is expected to rebound from the setbacks suffered last year following the shop rationalisation. It expects a return to 15% growth by FY26, aided by normalized capital spending and higher revenue per square foot.

According to the research, the refining business, which was under pressure from dropping GRMs in FY24, has begun to reverse its trajectory. GRMs are predicted to rise by 5.4% year on year in FY26, helped by a weaker Indian rupee.
The corporation will gain from its new investments in the energy sector, which include solar and storage capacity. RIL intends to use 20 GW of panel production for internal consumption and manufacture green H2 in 2025, with a goal of reaching 50 Wh of cell-to-pack battery manufacturing by 2027.The Reliance gigacomplex will be the largest end-to-end renewable energy manufacturing facility.

According to the study, Reliance plans to create a battery gigafactory by 2026 and to accelerate sodium iron technology to a megawatt level by 2025. RIL inked its first 25-year PPA for 128MW and an MOU with the Maharashtra government for 100kTPA GH2 production (an investment of USD1.8 billion), which will help the business in public markets, according to the report.

Bernstein values RIL using a sum-of-the-parts approach, taking into account growth in its core segments. Jio’s telecom section is valued at 12x projected EV/EBITDA, while the retail segment is evaluated based on core and non-core operations. Refining and petrochemical segments are valued at 7 times FY26 EV/EBITDA. Bernstein emphasized RIL’s potential to generate substantial free cash flow and offer solid returns for investors, citing a steady-state EBITDA of USD 22 billion expected for FY25-27.

Q3 Results Date
The Ambani-led firm’s Board of Directors will meet next week on January 15, 2025, to accept un-audited standalone and consolidated financial reports for the quarter/nine months ended December 31, 2024. RIIL said last month that the Trading Window closing period will begin on January 1, 2025 and expire 48 hours after the Company’s financial statements for the third quarter ended December 31, 2024 become Generally Available Information.

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RIL performance in third quarter supported by performance of consumer businesses
Uncategorized - September 2, 2022

Reliance Industries earned a revenue of Rs. 223,113 cr.

Reliance Industries earned a revenue of Rs. 223,113 cr.

During the June 2022 quarter, Reliance Industries posted a consolidated net profit of 17,955 crore, up from 12,273 crore in June 2021, up by 46.3%. The revenue jumped by 54.5% to 223,113 crore from 144,372 crore in Q1 last year. Meanwhile, EBITDA was at 37,997 crore in Q1 FY23 as against 23,368 crore in Q1 FY22 and 31,366 crore in Q4 FY22. The margin improved to 17.3% compared to 16.7% in Q1 FY22 and 15.1% in Q4 FY22.

Best quarterly performance for Jio and Retail:

This was facilitated by higher contributions from fashion and lifestyle and consumer electronics segment sales. The segment added nearly 792 stores, bringing its total store count to 15,866 stores at the end of Q1FY23. Digital and new commerce increased twofold year on year and now account for 19% of total revenue. The company’s own-brand consumer electronics products portfolio continues to scale up. In Q1 FY23, sales of in-house consumer electronic brands increased by 6.0x year on year. Fashion and lifestyle have experienced strong growth in sales, driven by regional festivities and promotions. The average bill value (ABV) and conversion ratio are at an all-time high in this segment.

With increasing partnerships, Ajio’s online sales platform added nearly 660 brands in the quarter. Ajio Luxe sales rose by 6.0x YoY with the presence of 400 brands and over 38,000 options on the Ajio platform. Its in-house brands contributed 30% of total sales in the category in Q1FY23 vs. 27.0% in Q1FY22. It introduced 14 new in-house brands in Q1FY23. In Q1FY23, urban ladder and pharma retail sales increased 2.0x year on year.The merchant base has increased by 50% YoY and Reliance Retail has ramped up in 2,400 towns.

RIL is a preferred downstream player with a strong growth outlook for consumer-centered businesses, and further value unlocking in digital and retail businesses would add to shareholders’ returns in the coming years. Expecting the 5G network to further skew the telecom market in favour of Jio, Its growth prospects look promising, led by subscriber accumulation post churn and regular tariff surg. The launch of 5G is to be looked forward to. RIL is an ideal pick given its dominant position across business verticals. However, we expect 17% annual growth in EBITDA over FY22-FY25, driven by a 6% CAGR for the cyclical business and a 26% CAGR for the consumer business. The increase in value of energy business will offsets decrease in consumer business.

Jio stands to garner connectivity and IOT revenues along with a significant share of the market. Jio’s growth prospects look promising, led by subscriber additions post churn and regular tariff hikes. The company will include the migration of high-end customers from competitors due to superior user experience and balance from the upgrade to 5G smartphones.

Valuations:

The company has reported an EPS of Rs. 26.54 for the period ended June 30, 2022 as compared to Rs. 19.36 for the period ended June 30, 2021. The ROCE and ROE stood at 9.42% and 8.1%, respectively. The stock is trading at a P/E of 26.9x, which is not expensive, and a 5-year P/E of 17.9x. The EBITDA multiple is 14.6x and has an interest coverage ratio of 7.01x. The price to book ratio is at 2.22x, which has a book value of Rs.1152. The scrip was trading at Rs.2560, down by 2.94% on Thursday.

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