Reliance Industries: Scaling up and hitting milestones (Result Update)
23-04-2024

Reliance Industries (RIL) has delivered good results for the quarter and closed the year on a high note. Milestones include consolidated EBITDA crossing Rs. 1.75 lakh crore mark, PBT surpassing Rs. 1 lakh crore, and market capitalization exceeding a staggering Rs. 20 lakh crore. These numbers are a testament to the scale at which it operates. Segmental performance is as follows-

Telecom: 

• Jio strengthened its market leadership to 40.1% in subscriber market share by adding 10.9 mn users during the quarter. ARPU for the quarter came in at Rs. 182 (+2% YoY). Data traffic was up 31% YoY at 148.5 bn GB aided by network scale-up and increasing 5G adoption. Jio AirFiber is now available across 5,900 towns in the country.
• EBITDA margin for Jio Platforms stood at 50.2%, up 50 bps driven by a higher customer base and operating leverage.
• Expectations of raising tariff rates in FY25 and increasing adoption of Jio AirFiber could further boost revenues. 

Retail:

• The company opened 562/1,840 new stores with gross area addition of 7.8/15.6 mn sq. ft. in Q4FY24 and FY24 respectively; total store count stood at 18,836 with 79.1 mn sq. ft. retail area. 
• Revenue in the quarter grew 11% YoY, led by consumer electronics and fashion & lifestyle consumption baskets. EBITDA for Q4 grew by 19% YoY; margin came in at 8.3% (+60 bps YoY). 
• Going ahead consumer durables can show growth in average bill value which should drive future growth.

O2C:

• In this segment, the business environment has remained challenging for FY24. Fuel cracks fell between 20% and 45% from elevated levels to some extent offset by lower SAED (special additional excise duty). 
• On the petrochemical side, the decline was also sharp for polymers (8% to 21%), and for polyester chain delta (about 6%). Despite the challenging environment company was able to deliver an EBITDA of Rs.62,393 Cr (+0.5% YoY). 
• Going forward domestic demand for fuels and downstream chemicals is likely to remain strong on account of continuing emphasis on infrastructure projects, increased mobility, and positive consumer sentiment.

O2G:

• The segment registered an EBITDA of Rs 20,191 Cr (YoY +1.5%) which is on the back of higher production. KG D6 field performance was as per expectations contributing ~30% to India’s domestic gas production. 
• Price realization was slightly lower during the year, but that has been more than offset by the higher production.

We had previously given a buy call at Rs. 2,300, and the stock has already surpassed Rs. 2,900, yielding a 26% return. With new avenues for growth, a strong execution history, scalable businesses, a comfortable debt-to-equity ratio as well as robust free cash flow generation, RIL is a company we want to remain invested in. We upgrade our MRP to Rs 2,845.