RIL shares fall nearly 5% as EBIDTA misses analysts' estimates

Updated : January 25, 2021 12:07 PM IST

The share price of Reliance Industries fell nearly 5 percent on Monday after the firm's December-quarter earnings missed analysts' estimates.

Reliance Industries’ Q3FY21 consolidated business EBITDA was down 5 percent year-on-year.

The share price of Reliance Industries fell nearly 5 percent on Monday after the firm's December-quarter earnings missed analysts' estimates. Reliance Industries’ Q3FY21 consolidated business EBITDA was down 5 percent year-on-year, missing estimates.

The disappointing number was largely on the back of a miss on standalone EBIDTA, Motilal Oswal noted in a results review note.

The stock fell as much as 4.7 percent to day's low of Rs 1,953 per share on BSE.

However, the company's profit of Rs 13,100 crore, up 13 percent YoY, beat the estimate, driven by investment income and near-zero tax liability.

As per analysts, oil-to-chemical (O2C) and retail missed expectations, but RJio beat forecasts. While recovery is underway, it is mixed, Edelweiss Securities observed. Management refrained from giving GRMs this quarter, which is a major parameter for assessing core business, it added.

The management has also reorganised Refining and Petrochemical to facilitate holistic agile decision making, pursue attractive opportunities for growth with strategic partnerships, and drive the move towards further downstream, Motilal Oswal noted in its report.

For the oil business, the company's EBIDTA fell 33 percent YoY and profit fell 5 percent. Meanwhile, revenues were lower than estimates for both Reliance Jio and Reliance Retail.

Reliance Retail's revenue declined 9 percent YoY but EBITDA grew 13 percent led by cost management initiatives and higher investment

income. However, in 9 months of FY21 (April-December), the company’s revenue/EBITDA declined 11 percent/13 percent weighed by nationwide lockdown due to the COVID-19 outbreak.

In Jio, the subscriber additions in the telecom business were just 1 percent. However, it reported revenue/EBITDA growth of 6 percent/8 percent QoQ, led by 4 percent growth in ARPU

“(Jio’s) net subscriber additions at 5 million were its lowest ever in a quarter. Rise in monthly subscriber churn to over 1.5 percent for the past two quarters is impacting net additions. The company highlighted that continued impact of covid and campaigns against Reliance in some areas kept churn high in Q3," Jefferies said in a note.

Despite signs of weakness across categories, analysts remained bullish on the stock. Here's a look:

Goldman Sachs

The company has maintained a 'buy' call on the stock, with a target at Rs 2,390 a share. The Q3 was in-line, said the brokerage, adding that O2C carve-out was underway as consumer businesses continue to grow. The brokerage expects the core EBITDA growth of 59 percent YoY in FY22. Continued sequential earnings recovery along with catalysts around telecom tariff hikes, new product launches, potential energy business stake sale can reverse this underperformance, it added.

Credit Suisse

The brokerage has a 'neutral' rating on the stock, with a target at Rs 1,930 per share. It was a weak quarter across retail, O2C & Jio, said CS, adding that there was a good ramp-up in JioMart and the fashion segment.

The brokerage also cut FY22/FY23 EPS estimates by 4 percent/3 percent due to slow recovery in refining margin and also cut estimates due to the slow pace of net subscriber additions in Jio.

IIFL Securities

The brokerage maintains a ‘buy’ rating, with a price target of Rs 2,055 per share. As per the brokerage, the outlook on margins for the O2C business is improving as inventories are drawn down and demand growth in polymer and polyester sustains. It raised FY21, FY22, FY23 EPS estimates by 5 percent, 2 percent and 2 percent, respectively, driven by a rise in Jio as well as low tax outgo.

Emkay

The brokerage maintains a 'hold' rating and raised the price target to Rs 2,050 apiece from Rs 1,970. As per Emkay, recovery in global demand implies a constructive margin scenario for O2C and earnings outlook for retail. It lowered FY22/23E EPS by 4 percent, assuming lower other income, higher minority interest based on Q3 run-rate.

Disclosure: Network18, the parent company of CNBCTV18.com, is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

RIL shares fall nearly 5% as EBIDTA misses analysts' estimates

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