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YES Securities
Reliance Industries (Buy)
CMP: ₹1,182.95
Target: ₹1,550
Reliance Industries reported better than expected performance during Q3 FY19. Consolidated PAT at ₹10,300 crore (first Indian private sector company to achieve this feat in a quarter) was better than street estimates by 7.7 per cent. The beat was primarily owing to strong show by Retail and Jio. Also, oil & gas business reported a better than forecasted profitability. While GRMs were tad lower than estimates, the impact was offset by higher throughput. Petrochemical segment performance was broadly in line with forecasts.
Refining segment performance over the medium term will be dependent on the implementation of 2020 IMO fuel Sulphur regulations, which are expected to drive cracks for diesel. For RIL, timely execution of petcoke gasification will be the key.
Retail business momentum will sustain given RIL’s reach and new initiatives. For Jio, sustained subscriber addition and expected improvements in ARPU along with operating leverage benefits will lead to exponential PAT growth in the next few years. Jio’s plan to demerge fibre and tower assets will be keenly watched as it has potential to reduce the debt burden.
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