Reliance Industries outperforms Q2F24 EBITDA estimates with strong energy and retail revenue

Reliance Industries Ltd (RIL) has reported a better-than-expected performance for the second quarter of fiscal year 2024, surpassing EBITDA estimates by 2%. The company’s robust earnings have been driven by strong energy revenues and significant growth in retail sales.

Today, RIL announced a 27% surge in consolidated net profit, amounting to ₹17,394 crore (INR100 crore = approx. USD12 million) for the quarter. This increase was largely supported by the company’s oil-to-chemicals (O2C) business. Consolidated revenue also rose by 1%, reaching ₹2.34 lakh crore for the quarter.

The company has attributed this quarter’s performance to the completion of the 5G network rollout and the development of its retail ecosystem. RIL’s management expects capex intensity to decline by the end of FY24 following these developments.

Despite costs associated with commissioning MJ1 causing an upstream miss, RIL managed to beat Retail and O2C estimates. Analysts have noted a decrease in net debt and a slowdown in capex intensity, pointing towards a favorable risk-reward scenario.

Additionally, RIL has seen a ₹8,000 crore reduction in its net debt to ₹1.2 lakh crore since March. This reduction was facilitated by a ₹15,300 crore capital raise from retail venture stake sales.

In terms of future prospects, Motilal Oswal Securities has highlighted the double-digit EBITDA growth of RIL’s consumer business. The firm projects substantial EBITDA CAGR for both RJio and Reliance Retail over FY23-25, driven by footprint additions and new categories in retail.

On the other hand, Nuvama Institutional Equities noted that RIL is entering a “golden refining era” with ramped up volumes at MJ field and a potential $35 billion capex monetization on the horizon.

Morgan Stanley has maintained its share price target for RIL at ₹2,821. Similarly, Nomura India has kept its ‘Buy’ rating with a target of ₹2,925. Emkay Global also reiterated its ‘Buy’ stance on RIL due to a steady earnings outlook and the peaking of the current capex cycle. The company’s premium valuation multiples reflect the potential for rapid expansion in its retail business and aggressive digital platform rollouts.

InvestingPro Insights

Drawing from the latest data and insights from InvestingPro, it’s clear that Reliance Industries Ltd (RIL) has a strong financial standing. The company’s market cap stands at $3.32 million, with a revenue of $17.99M million as of Q2 2023. The revenue growth for the same period was an impressive 62.0%.

Two key InvestingPro Tips that are particularly relevant to RIL’s current situation include the fact that the company’s strong earnings should allow management to continue dividend payments, and that the company has raised its dividend for 3 consecutive years. This is a testament to the company’s financial stability and commitment to rewarding its shareholders.

For more detailed insights and tips, consider subscribing to the InvestingPro package which includes over 13 additional tips for this company alone. These tips could provide valuable guidance for making informed investment decisions.

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