Shares of Reliance Industries fell 2 per cent on Monday as its Q1 performance disappointed traders even as analysts are divided. Most analysts see only limited upside for the stock from current levels. The stock closed the day at ₹2,487.40 on the NSE.

Post market hours on Friday, Reliance reported an 11 per cent drop in its June quarter net profit at ₹16,011 crore against ₹17,955 crore in the corresponding quarter of the previous year.

Consumer strength

According to Jefferies, sustainable competitive advantage on scale economics, cost leadership, financial strength, ₹2 lakh crore FCF invested in consumer businesses created ₹9 lakh crore in equity value, and new growth engines with large addressable markets — Digital in Jio, e-comm in RR, COTC in O2C and new energy business are its rationale behind the investment.

Jefferies, in fact, increased the target price to ₹3,100, from ₹3,060, the stock is trading near its bear case valuation and offers favourable risk-reward.

Systematix, on the other hand, cut the target price to ₹2,550 from earlier ₹2,766 largely reflecting the exclusion of Jio Financial Services (JFSL). “We downgrade the stock to Hold from earlier Buy due to limited upside after the recent run-up,” the brokerage said.

According to valuation by Motilal Oswal, the company’s consumer business has been a mixed bag with retail seeing moderate growth but likely to witness gains from the Future group footprint.

Telecom to soften

“Growth in telecom will continue to soften with higher base and lower probability of tariff hikes in the near term as well as intensifying 5G spends. While upstream production is projected to increase to 30mmscmd in the coming months from 20.9mmscmd in 1QFY24, concerns remain on refining and petrochem margins going forward,” the report said.

Noting that the consumer electronics business delivered steady growth, research analysts of B&K Securities said that the growth momentum was led by improved conversions and better average bill value (ABV). “We were building in for Oil to Chemicals (O2C) EBITDA to decline 22 per cent q-o-q and as such were positively surprised by a relatively robust performance (down only 6 per cent q-o-q). Other key segments such as Telecom, Retail and Oil & Gas reported largely in line with our expectations,” it said.

In addition, Reliance Industries’ media business recorded gross revenue of ₹3,790 crore for Q1FY24, up by 143.3 per cent y-o-y. Its revenue growth of 141.7 per cent was driven by Viacom18, as IPL on JioCinema delivered record advertising revenues.

BNP Paribas, which increased the target price to ₹2,925 from ₹2,800 said, “Our EBITDA estimate upgrades are primarily led by the O&G division. We have also raised our interest and depreciation assumptions, resulting in slightly lower earnings estimates.”

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