Oil-to-telecom conglomerate Reliance Industries (RIL) will focus on this week’s trading session after its Q2 results. During the second quarter, RIL missed estimates in terms of profitability, while revenues picked up on the back of growth in key sectors. O2C segment margins slipped, however, as the retail and telecom business saw record operating profit during the quarter. As RIL is one of the leading players in its product and services, this provides comfort in the stock for long term value creation. There are 3 triggers that can affect the future performance of RIL.
on a consolidated basis, RIL posted net profit of 13,656 crore in Q2FY23. slightly less than 13,680 crore in the corresponding quarter (Q2FY22) of the previous year. Sequentially, RIL’s profit declined by 24%. However, revenue increased by 33.7% 2.32 lakh crore in Q2FY23 as compared to 1.74 lakh crore in the second quarter of the last financial year.
Among the key highlights of Q2, the company’s Reliance Retail and live Recorded Quarterly EBITDA of 4,404 crore and 12,011 crore 51.2% yy and 29.2% yoy respectively. In addition, Reliance Retail has become the first Indian retailer to have more than 50 million square feet of retail space. In addition, the oil and gas business witnessed a 3-fold jump in quarterly EBITDA. However, O2C business EBITDA declined by 5.9% year-on-year 11,968 crore in Q2FY23, but revenue climbed 32.5% year-on-year. The company’s exports were approx. 86,382 crore is 57.5% higher annually.
RIL shares closed on Friday last week 2,471.95 each lost 1.16% on the BSE. The largest company in terms of RIL is Market Share with more rated 16.72 lakh crore.
On RIL’s Q2 results, research analysts at ICICI Direct said in their report, “RIL’s results were lower than expected on the profitability front. Revenue was up 33.7% year-on-year. 2,32,863 crore as all major segments registered revenue growth. It grew 4.4% QoQ mainly led by the retail segment.”
However, analysts say RIL’s EBITDA was low 31,224 crore, up 20% YoY (down 17.8% QoQ). EBITDA growth YoY was driven by the retail segment (51% YoY) and digital services (28.6% YoY). O2C segment margin was down 5.9% YoY, 40% QoQ on account of special additional excise duty levied on export of fuel.
Should investors invest in RIL shares after Q2 results?
As ICICI Direct notes, the long-term prospects in each of its product and service portfolios and RIL’s dominant position provide comfort for long-term value creation. RIL’s consumer business will be the growth driver in the times to come. However, an improvement in the refining product cleavage is observed compared to the peaks observed in Q1FY23.
“We maintain our hold rating on the stock,” said analysts, adding that we value RIL 2,700 on a SOTP basis.”
ICICI Direct in its report has highlighted the key triggers for RIL’s future performance. These are:
– Value addition from ‘Digital Ecosystem’ which will be captured at Jio Platforms (JPL) level.
Stable FCF in retail will enable the production company to maintain debt at lower levels and improve its ability to invest in future inorganic opportunities.
– Increase in GRM will be the key to increase O2C earnings. Steady cash flow from the traditional business enables RIL to invest in the new energy vertical.
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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