Mukesh Ambani, billionaire and chairman and managing director of Reliance Industries Ltd., pauses during an event. (Photographer: Simon Dawson/Bloomberg)

Why Dalal Street Remains Upbeat On Reliance Industries Despite Muted Q4

Most brokerages maintained their stance on Reliance Industries Ltd., after its quarterly profit matched their estimate as a strong performance in retail was offset by subdued refining, oil and gas and telecom businesses.

The company's net profit rose nearly 3 percent sequentially to Rs 8,697 crore, below Bloomberg consensus estimate of Rs 8,923 crore. RIL reported gross refining margins of $11 per barrel, which was also marginally below the analyst estimates of $11.2 per barrel and volumes fell six percent. Its telecom arm Reliance Jio Infocomm Ltd. reported moderate growth due to tariff cuts.

Brokerages expect the Mukesh Ambani-owned company to maintain its growth momentum going forward, with the commissioning of projects in the energy business and monetisation of Reliance Jio.

Also read: Reliance Industries To Shut Oil, Gas Fields In KG-D6 Block 

Here's what brokerages had to say on RIL:

Deutsche Bank

  • Maintain Buy; hiked target price to Rs 1,180 from Rs 1,150; around 18.5 percent upside from the current levels.
  • Commissioning of projects in its energy business and ramp-up of monetisation at Reliance Jio to maintain the outperformance, over the next six months.
  • Expansions and robust downstream margins to drive annual Ebitda growth of 24 percent over FY18-20.
  • Commissioning of petcoke gasifiers to boost refining margins.
  • Reliance Jio indicated the imminent launch of fiber broadband business and continued focus on subscriber additions in mobile.


  • Maintain Buy; hiked target price to Rs 1,201 from Rs 1,174; nearly 21 percent higher than the current levels.
  • Expect free cash flow to turnaround, return on equity to rise and profit to double in four years with commissioning of mega core projects.
  • Refining earnings to revive with new projects.
  • Retail segment targeting 30 percent annual revenue growth over next decade.
  • Expect ARPU dilution in coming quarters on account of ramping of JioPhone and sustained competitive intensity.
  • Expect Jio to be cost competitive and gain market share.

Motilal Oswal

  • Maintain Buy, with target price of Rs 1,150.
  • Fourth quarter net profit benefiting from higher other income and lower depreciation.
  • Expect GRM to remain strong due to low utilisation in Latin America and Africa.
  • Petrochemical deltas shown strength due to strong demand and delay in commissioning of new projects in the U.S.
  • Stabilisation of the core projects to generate free cash flow.
  • Expect accelerated revenue/Ebitda growth to drive strong market share gains for Reliance Jio.


  • Retain under perform rating with a price target of Rs 790 amid “rich” valuations.
  • Q4FY18 EPS 3 percent below estimates.
  • FY18 earnings rose 21 percent and working capital helped cash flow again but $12.3 billion in capex still left net liabilities $4 billion higher at $38.3 billion.
  • Expect liabilities to fall gradually even as “earnings uncertainties remain”.
  • Wider gross refining margins, telecom revenue could pose risks to rating.

Goldman Sachs

  • “Solid” finish to FY18; “best is yet to come”
  • Petrochemical business was key driver of growth with 10 percent QoQ growth
  • Refining margins missed forecasts. Offset by “strong” growth momentum in retail business, with EBITDA up 80 percent QoQ
  • Jio revenues were in line with estimates, with higher subscribers offsetting lower ARPU


  • Remain positive on Reliance even after Ebitda miss.
  • Overall numbers weren’t weak even as stand-alone Ebitda weaker than consensus expectations.
  • Consolidated Ebitda/PAT to record 34 percent/27 percent CAGR over FY18-20.
  • See company generating high free-cash flow soon as full benefits of refinery, petrochemicals expansion, R-Jio accrues and capex pace slows down.
Why Dalal Street Remains Upbeat On Reliance Industries Despite Muted Q4

Also read: Falling Tariffs Hurt Reliance Jio As Well