The Economic Times
English EditionEnglish Editionहिन्दी
| E-Paper
Search
+

    What made RIL shares tumble after December quarter results

    Synopsis

    Brokerages mostly have a 'neutral' rating on the stock, with 12-month price targets in Rs 1,900-2,450 range.

    Agencies
    Brokerages mostly have a 'neutral' rating on the Reliance Industries stock.

    INSIGHTS

    Read Stock Insights by ET for a quick analysis

    Explore Now
    NEW DELHI: A 12 per cent jump in the December quarter profit failed to lift shares of Reliance Industries on Monday. The stock fell 5 per cent intraday as brokerages said the Ebitda for key segments missed estimates, even the company's investment income and a near-zero tax liability drove profits growth higher.

    Brokerages mostly have a 'neutral' rating on the stock, with the 12-month price targets in Rs 1,900-2,450 range.

    Transparency levels are falling across businesses, said Edelweiss Securities, which noted that Reliance Industries has stopped reporting a key matrix — gross refining margin (GRM) — altogether. The brokerage noted that the company has ceased to provide a division-wise turnover breakup for retail, and that RJio’s key driver, FTTH, lacks granularity.

    "Quality of profit suffers as RIL’s investment income of Rs 78o crore overshadows core earnings growth following cash infusions," Edelweiss said while suggesting that consumer-facing businesses RJio and retail optically contribute about half of RIL’s Ebitda, but they contribute only 29 per cent to RIL’s overall consolidated profit after tax.

    The stock fell 4.7 per cent to hit a low of Rs 1,953.40 on BSE.

    JP Morgan has maintained a 'neutral' rating on the stock with a target of Rs 1,990. It said that Ebitda had a small miss across most segments and that Jio's net subscriber addition missed estimates by a large margin even as average revenue per user beat estimates. Retail Ebitda excluding investment income was soft, it added.

    "The miss was largely on energy business with standalone Ebitda, 12 per cent below our estimates. RIL has reorganised its reporting to combine the refining and petrochemical segments as a single O2C segment. With the changed reporting, it has not disclosed refining GRM, which makes quarterly comparisons difficult. Petchem was further strong sequentially. Thus, we believe that refining was likely weaker vs our GRM forecast of $6 a barrel," Nomura India said. The brokerage has cut Reliance's target to Rs 2,400 from Rs 2,450.

    Credit Suisse has maintained a 'neutral' rating on the stock with a target of Rs 1,930 citing a weak quarter across Retail, O2C and Jio businesses. While suggesting a good ramp-up in JioMart and Fashion segments, it has cut its FY22 EPS estimate by 4 per cent and FY23 by 3 per cent. December quarter numbers were below expectations on lower retail sales, it said.

    The gross refining margin (GRM) had stood at $5.7 per barrel for the September quarter.

    Citi also maintained a 'neutral' stance on the stock with a target of Rs 2,130. Pre-tax profit was flat on a year-on-year basis and 8 per cent ahead of estimates, aided by a sharp decline in interest costs, it said. Combined O2C EBitda at Rs 9,800 crore, up 10 per cent sequentially, was below expectations, the foreign brokerage said.

    Goldman Sachs said it maintained a 'buy' rating on the stock with a target of Rs 2,390 as it expects core Ebitda growth of 59 per cent YoY in FY22E.

    On a YoY basis, Reliance Industries reported a 12.5 per cent year-on-year rise in its consolidated net profit to Rs 13,101 crore, which was above analysts’ estimates. The oil-to-telecom conglomerate reported consolidated revenues of Rs 1.2 lakh crore, up 21.10 per cent year-on-year.

    The weak topline performance of the company was attributable to the continued struggles of the refining business and retail business of the company due to the Covid-19 pandemic.

    "We have delivered strong operational results during the quarter with a robust revival in O2C and retail segments, and a steady growth in our digital services business. I am proud that Reliance has employed 50,000 more people since March 2020," Chairman and MD Mukesh Ambani said.

    The revenues of the oil-to-chemical business, which contribute nearly two-thirds to the company’s topline, fell to Rs 83,838 crore in the reported quarter from Rs 1.19 lakh crore a year ago.

    RIL’s refining business has suffered due to the impact of the Covid-19 pandemic on demand for transportation fuel, which occupies the maximum pace in the company’s refining slate.

    Reliance Jio’s revenues rose nearly 6 per cent sequentially to Rs 18,492 crore due to increased data consumption on its network, given that majority of the formal sector is still working from home. Sales of the organised retail business of the company under Reliance Retail Venture fell nearly 10 per cent sequentially to Rs 33,018 crore in the quarter, reflecting the weakness in the retail operations due to localised restrictions.
    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    11 Comments on this Story

    Ankur Badhwar38 days ago
    reliance Q2 Revenue were 25% and Q3 21% down.
    A company which has lost 25% of Revenue for last 6 months, indeed is performing very very bad.
    Additionaly in Q3 Relaince have became non trasparent in reporting results.
    The paid brokerages tried their best to fool innocent Retail Investors after Q3 results , they can only fool innocent India Retails Investors but not FII/DII.
    Profit increase is just a jugglery in book keeping.
    Reliance stock true value is only around 1500 and in next couple of days its stock will fall more than 10% close to 1500.
    Retail Investors should tale out their money out sharp by 9.15 AM else they will loose big amount again.
    Already farmers protest has broken ambani back and his slave modi also will not be able to save him
    ZEN DAHODI39 days ago
    Why RIL stock has near-Zero tax liability? Is it due to the Modi government?
    Kcn Tips39 days ago
    next 2 days ril performance?
    Read before you invest. Insights on Reliance Industries Ltd.. Explore Now
    The Economic Times