Analysts Remain Bullish On Reliance Industries After Q3 Results

Here’s what analysts have to say about Reliance Industries’ third-quarter results...

Goldman Sachs

• Maintains ‘buy’ rating, with price target at Rs 2,390 apiece.
• Results showcased shift towards free cash flow generation, pivot towards suite of digital launches, focus on further chemical integration.
• Interest expense continued to come down with more to follow.
• Continued sequential earnings recovery along with catalysts around telecom tariff hikes, new product launches, potential energy business stake sale can reverse this underperformance.
• Expects core Ebitda growth of 59% year-on-year in FY22 based on cyclical growth in the O2C business, structural growth in consumer business driven by new digital product launches.
• Sees favourable risk-reward with 50% upside in bull case and 9% downside in bear case.

BNP Paribas

• Maintains ‘buy’ rating but cuts price target to Rs 2,367 apiece from Rs 2,497.
• Change in reporting makes O2C performance not comparable.
• Retail business close to pre-Covid levels, Jio ARPU surprises.
• Lower price target largely due to change in net debt position as well as marginal tweak to earnings.
• Lower taxes and lower interest expense should continue for Q4FY21 as well.
• Likes RIL but near-term weakness should continue until economics of O2C business improves.

Nomura

• Maintains buy rating with price target cut to Rs 2,400 apiece from Rs 2,450
• Comparison difficult due to reorgaisation of O2C business
• Consumer business volume pick-up was slower but profitability was better
• Pandemic continues to impact key segments but outlook remains strong
• Outperformance likely to sustain
• Cut FY21F Ebitda estimate by 14% on weak operating earnings but expect it to grow 62% in FY22F
• Expect 33% earnings CAGR over FY20-23F

Motilal Oswal

• Maintains ‘buy’ rating; raises price target to Rs 2,325 apiece from Rs 2,280.
• Jio Platforms is creating multiple monetisation opportunities in the digital space.
• Reliance Retail margins deliver despite weak revenue performance.
• Expects revenue growth of 17%/14% and Ebitda growth of 44%/16% over FY22/23E on the back of an 8% subscriber CAGR over FY21-23.
• Premium valuation multiple captures the opportunity for rapid expansion in the retail business and aggressive rollout of JioMart.

IIFL Securities

• Maintains ‘buy’ rating, with price target at Rs 2,055 apiece.
• Outlook on margins for O2C business is improving as inventories are drawn down and demand growth in polymer and polyster sustains.
• Jio’s growth should be driven by subscriber addition, ramp-up in FTTH and enterprise rollout.
• Raises FY21, FY22, FY23 EPS estimates by 5%, 2% and 2%, respectively, driven by rise in Jio as well as low tax outgo.
• Positive newsflow around acquisition of Future Group assets or induction of a partner in the O2C business may cause the stock price to rise by 15-20%.

JM Financial

• Maintains buy rating, with price target at Rs 2,500 apiece
• Focus on improvement in Jio's subscriber additio
• Retail business is gradually recovering post lockdown
• O2C Ebitda in-line; lack of details make it difficult to comment on refining and petchem margins
• Cut FY22-23 Ebitda estimates by 1-2% facoring in a weak GRM
• Entering a strong free cashflow generation phase with major capex completed
• Expect 17-18% EPS CAGR over the next 3-5 years
• Key Risks: Weak subscriber addition and limited ARPU hike, challenges in monetisation of digital opportunities, weak downstream margins.

Emkay

• Maintains hold rating; raises price target to Rs 2,050 apiece from Rs 1,970
• O2C integration is a move towards shifting the Jamnagar complex further downstream and there will be scale and synergies
• Recovery in global demand implies constructive margin scenario for O2C and earnings outlook for retail
• Lower FY22/23E EPS by 4%, assuming lower other income, higher minority interest based on Q3 run-rate
• Cut FY21-23E retail Ebitda estimates by 11-13%