Most Analysts Remain Bullish On RIL, Unfazed By Profit, Revenue Drop In Q2
The Reliance Industries Ltd. logo is displayed at the company’s annual general meeting. (Photographer: AdeelHalim/Bloomberg)

Most Analysts Remain Bullish On RIL, Unfazed By Profit, Revenue Drop In Q2

Most analysts retained their bullish investment recommendations for Reliance Industries Ltd. after second quarter even as they await further triggers from its retail and telecom businesses and a recovery in the petchem and refining segments.

The Mukesh Ambani-led conglomerate’s profit fell 6.6% year-on-year to Rs 10,602 crore in the July-September period. Revenue fell 24% over the same period last year to Rs 1.16 lakh crore. Still, earnings and top line beat the consensus estimates.

Most of the company's segments—from oil & gas to retail—saw their revenue decline between 5% and 55% over the year ago.

Reliance Jio Infocomm Ltd., the telecom unit of India’s largest company by market capitalisation, too, reported a 13.2% sequential rise in net profit. Its average revenue per user rose to Rs 145 from Rs 140 in the previous quarter.

Out of the 35 analysts tracking Reliance Industries, 24 have a 'buy' recommendation, seven have a hold, while the rest have a 'sell' recommendation on the stock. The average of Bloomberg consensus 12-month target price is 12%. Shares ended 8.7% lower - the most in seven months at Rs 1,876 - the lowest level in three months.

Also read: RIL Q2 Results: Profit, Revenue Fall Despite Telecom, Retail Cushion

Here’s what analysts have to say:

BofA Securities

  • Maintains 'buy' rating; price target at Rs 2,355 apiece
  • Strong growth in petchem, retail and Jio
  • Management indicates that business activity is near pre-Covid levels
  • Benefits of lower interest costs will be reflected in the coming quarters
  • Retains buy rating on favourable risk reward

JPMorgan

  • Maintains 'neutral'; price target at Rs 2,060 apiece
  • Retail, petchem strong; refining weak
  • Jio subscriber addition a miss
  • Beyond a near-term stock bounce, earnings outlook weak
  • Needs a large telecom tariff hike
  • Most of the news flow is behind us
  • Any delay in closing future deal will impact fair value by 5%

Nomura

  • Maintains 'buy' rating; price target at Rs 2,450 apiece
  • Very weak refining offset by petchem and consumer business
  • Jio marginally better than expectations; outlook remains good
  • Retail should reach pre-Covid-19 levels soon

Axis Capital

  • Maintains 'add' rating, but cuts price target to Rs 2,200 from Rs 2,300 apiece
  • B2C business continues to drive performance
  • Jio's financials continue to improve on subscriber addition and traction in JioFiber.
  • Cuts oil-to-chemical business Ebitda by 2-11% for FY21-23E
  • Expects Ebitda CAGR of 19%, 8%, 38% and 22% for consolidated, cyclical, Jio, retail business over FY20-24

Macquarie

  • Maintains 'underperform' rating; price target of Rs 1,320 apiece
  • Today's price sees flawless execution on multi-pronged growth aspirations
  • Remains cautious as we still see no economic moat
  • Expects 20% growth in EPS but remains 23% below consensus
  • Continues to see meaningful execution challenges and no moat, particularly in retail
  • Trading at blue-sky valuations

Emkay

  • Maintains 'hold' rating and raises price target to Rs 1,970 from Rs 1,850 apiece
  • Stock is fairly valued; though upsides may come on Aramco deal
  • Cuts FY21 Ebitda estimates by 11% due to an 18% and a 4% reduction in Jio, retail
  • Lowers FY22/23 EPS forecast by 2-3% each
  • Key risks: Adverse commodity margins, competition and stake sale uncertainty

Motilal Oswal

  • Maintains 'buy' rating; price target at Rs 2,240 apiece
  • Ebitda in-line with estimates
  • Growth in Jio slows
  • Expects revenue growth of 31% and 19% over FY21/22
  • Expects Ebitda growth of 50% and 42% over FY21/22
  • Strong performance from retail in slowing economy
  • Ascribes equity valuation of Rs 900 per share to Jio and Rs 627 per share to retail

Also read: Reliance Jio Q2 Results: Profit Rises 13% On A Larger Subscriber Base

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