Reliance In Focus: Prabhudas Lilladher Recommends To Accumulate Mukesh Ambani-Led Stock, TP At Rs 2,912

Billionaire Mukesh Ambani's star Reliance Industries (RIL) will be in focus during the holiday-shorten trading week. The reason will be RIL's Q3 results for FY24. In the quarter, while Reliance continues to witness strong growth in retail and telecom business, its O2C segment is still under pressure. Nevertheless, Reliance is on track for commissioning a new energy segment and that has kept Prabhudas Lilladher optimistic in RIL. The brokerage suggests Accumulate in RIL for a target price of Rs 2,912.

During Q3FY24, Reliance's net profit, on a consolidated basis, stood at Rs 19,641 crore registering a growth of 10.9% YoY. While gross revenue stood at Rs 248,160 crore, logging a single-digit growth of 3.2% YoY. Meanwhile, its EBITDA stood at Rs 44,678 crore up by 16.7% YoY with a margin of 18% which expanded by 210 bps.

However, in Q3, O2C EBITDA saw muted growth because of planned maintenance and inspection shutdown. Oil & Gas business posted an EBITDA of Rs 5,804 crore, up by 49.6% YoY.

Mukesh D. Ambani, Chairman and Managing Director, of Reliance Industries Limited said, "The Oil & Gas segment posted its highest ever quarterly EBITDA. I am happy to note that KG D6 is now contributing 30% of India's gas production, fueling its transition towards a greener and cleaner tomorrow. The O2C segment delivered resilient performance aided by operational flexibility and strong domestic demand. Staying true to its commitment to sustainability, Reliance has become the first Indian company to chemically recycle pyrolysis oil into circular polymers."

On Saturday, RIL's share price reacted to Q3 results. The stock ended at Rs 2713.20 apiece, down by 0.80% with a market cap of over Rs 18.35 lakh crore.

Should you buy Reliance share?

In its post Q3 review report, Prabhudas Lilladher said, "Reliance Industries' (RIL) consolidated revenue declined 3% QoQ to Rs2,250.9 bn (PLe: Rs2,392.7 bn). EBITDA fell 1% QoQ to Rs 406.6bn (PLe: Rs 403.3 bn) while PAT also fell 1% QoQ to Rs 172.7 bn (PLe: Rs157.9 bn). Retail EBITDA grew 31.1% YoY to Rs62.6bn. Standalone EBITDA declined 8.5% QoQ due to lower fuel and downstream margins and planned maintenance shutdown. ARPU stood at Rs 181.7 while total subscribers stand at 470.9mn."

Further, the brokerage highlighted that Reliance Retail's revenue came in at Rs743.7bn, up 8% QoQ, 23.8% YoY led by growth across grocery, fashion & lifestyle and consumer electronics business. EBITDA stood at Rs62.6bn, up 7.5% QoQ and 31.1% YoY. PAT came in at Rs31.7bn, up 13.4% QoQ and 31.9% YoY. Footfalls grew 8.5 % QoQ to 282mn. A total of 252 new stores were opened taking the total count to 18,774 stores with an area of 72.9 mn sq ft.

Moreover, Jio Platforms Ltd reported a revenue of Rs 276.9 bn, up 3.1% QoQ and 11.3% YoY. YoY growth was led by subscriber growth. EBITDA came in at Rs 139.5 bn, up 3.2% QoQ and 11.5% YoY. PAT stood at Rs 54.5 bn, up 2.8% QoQ and 11.6% YoY. Subscribers grew by 11.2 mn QoQ to 470.9mn while ARPU came in at Rs181.7/month, flat QoQ.

On valuation, PL's note said, "The company is on track to commission new energy segment in phases starting this fiscal year-end. The stock is trading at 10.8x FY26E EBITDA. We maintain Accumulate rating with a TP of Rs 2,912, based on SoTP valuing the standalone business at 7.5x FY26 EBITDA, Jio at 15x FY26 EBITDA and Retail at 39x FY26 EBITDA."

Ambani last week said that the New Energy Giga Complex is all set to be commissioned in the second half of CY24. Ambani said he is confident that Reliance's New Energy business will play a pivotal role in the global movement for adoption of cleaner fuels.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.