Shares of Reliance Industries (RIL) fell almost 4% in trade on July 25 as the company's June quarter results failed to meet the expectations of investors.
The stock finally closed 3.31% lower at ₹2420.15.
RIL reported a 46.3% year-on-year (YoY) rise in its consolidated net profit for Q1FY23 at ₹17,955 crore. In the same quarter last year, the company's profit was ₹12,273 crore.
Consolidated revenue from operations jumped 54.5% to ₹2,23,113 crore in the said quarter against ₹1,44,372 crore in Q1FY22.
Consolidated EBITDA stood at ₹37,997 crore in Q1FY23 against ₹23,368 crore in Q1FY22 and ₹31,366 crore in Q4FY22. EBITDA margin improved to 17.3% versus 16.7% in Q1FY22 and 15.1% in Q4FY22.
Brokerages mixed after Q1
Motilal Oswal Financial Services maintained a 'buy' call on the stock with a target price of ₹2,785 after the Q1 numbers of RIL.
It has cut its FY23E EBITDA/PAT by 6%/10% led by 9%/11% decline in estimates of standalone EBITDA/PAT, respectively.
It expects consolidated revenue/EBITDA to clock 13%/15% CAGR over FY22-FY24.
"Using SOTP, we value the refining and petrochemical segment at FY24E EV/EBITDA of 7.5 times, arriving at a valuation of ₹721 per share for standalone business. We ascribe an equity valuation of ₹960 per share to RJio and ₹1,173 per share to Reliance Retail, factoring in the recent stake sale. Our higher EV/EBITDA multiples of 39 times for Retail and 18 times for Digital Services underscore new growth opportunities in the Digital space and steady market share gains," Motilal Oswal said.
Brokerage firm JM Financial maintained a 'buy' call on the stock but cut the target price to ₹2,950 from ₹3,000 earlier.
The brokerage firm said RIL’s consolidated Q1FY23 EBITDA, at ₹38,000 crore was 9% below its estimate of ₹41800 crore due to a lower-than-expected jump in O2C segment EBITDA while the performance of the digital and retail segments was largely in line.
The brokerage firm further said that the consolidated PAT was also significantly below its as well as consensus estimates of ₹22,500 crore and ₹21,600 crore due to the normalisation of the tax rate.
"We have cut our FY23 and FY24 PAT by 4.3% and 0.6% incorporating slightly lower GRM and normalised tax rate; we have revised our target price to ₹2,950 from ₹3,000. We reiterate a 'buy' given RIL’s industry-leading capabilities across businesses and expectation of strong 16-18% EPS CAGR over the next 3-5 years," JM Financial said.
Emkay Global Financial Services also has a buy call on the stock with a target price of ₹2,750.
"While Q1 numbers were a miss and Q2 GRMs are also down, we expect them to stabilize at more normative levels and upcoming winter to provide support," said Emkay Global.
"We cut our FY23/24/25E EPS by 29%/23%/20%, building in higher depreciation, interest costs and taxes, and lower other income and GRMs. We retain our buy rating with a 2% cut in target price to ₹2,750, building in lower O2C margins, offset by rollover to Sep’24E EBITDA," Emkay said.
YES Securities has an 'add' call on the stock with a target price of ₹2,755. The brokerage firm said RIL’s operating profits, though fairly robust, marginally missed its and street estimates on weaker than estimated refining margins.
"Strong refinery margin environment helped RIL deliver the best ever quarterly earnings. Revival in global petroleum demand amidst disrupted supply from Russia and China led to transport fuel cracks hitting historical highs. Strong O2C profitability was adequately aided by robust sales growth in the Retail segment and improved ARPU along with subscriber addition in the Digital services segment," YES Securities pointed out.
"Going ahead, while recessionary concerns could lead to moderation in GRMs and petrochemical margins, inflationary pressure could temper sales growth in the retail segment," the brokerage firm added.
ICICI Securities also has an 'add' call on RIL stock with a target price of ₹2,710. The brokerage firm said the prospects for the rest of FY23E have turned cloudy due to a sudden downturn in Asian GRMs and muted petchem spreads.
"We remain sceptical of meaningful expansion in return ratios and/or any major moves to return cash to shareholders in view of the sustained capex momentum over FY22-FY24E," ICICI Securities said.
Disclaimer: The views and recommendations made above are those of individual analysts or broking firms and not of MintGenie.
