Reliance Q4 Results: First Indian Company with Sales Revenue Above $100 Billion

Reliance Q4
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Revenue misses estimates: Consolidated revenue from operations for the quarter increased 36.8% on-year from Rs 1.54 lakh crore to Rs 2.11 crore, missing analyst estimates of about Rs 2.20 lakh crore. The growth in revenue was aided by a robust increase in the top line of the company’s O2C business. In the dominant Oil-to-Chemicals (O2C), revenues rose sharply by 44% YoY to Rs 1.45 lakh crore from Rs 1.01 crore in the last year period. Reliance becomes the first Indian company with gross revenue surpassing $100 billion.

Profit misses estimates: Reliance Industries has reported a 22.5% on-year rise in net profit to Rs 16,203 crore, missing street estimates of Rs 16,674 crore. The beat in the bottomline was aided by an increase in benchmark gross refining margins. Reliance Industries saw robust traction in the retail segment and sustained growth in Oil-to-Chemicals (O2C) and its digital services business. 

Operating performance: Reliance reported record quarterly consolidated earnings before interest, tax, depreciation, and amortisation (EBITDA) or operating profit at Rs 33,493 crore, up 30% year-on-year. EBITDA rose on the back of strong performance in the company’s consumer businesses (Retail and Jio). The operating margin contracted to 15.13% from 16.1% in the previous quarter.

Segment Wise Performance

Reliance O2C performance: The O2C business of Reliance Industries posted a strong show for the quarter as revenues jumped 44% YoY to Rs 1.45 lakh crore. It was primarily on account of higher realisations on the back of a sharp increase in crude oil prices. The segment’s operating profit was up 25% year-on-year to Rs 14,241 crore. Its EBITDA came in at Rs 12,386 crore against Rs Rs 11,667 crore, reported in the December quarter. The EBITDA margin stood at 8.5% Vs 8.9% (QoQ). The growth in EBITDA was led by multi-quarter high transportation fuel cracks, partially offset by lower polymer and intermediates margins and higher energy costs.

Reliance Retail: Reliance Retail delivered a best-ever quarter result posting all-time high Revenue and EBITDA despite the challenges posed by the spread of the Omicron wave and coming out from the festive quarter. The segment recorded Consolidated Gross Revenue of Rs 58,017 crore, up 23% on-year with broad-based double-digit growth across all consumption baskets. EBITDA for the quarter stood at Rs 3,705 crore, up 2.4% year-on-year, led by robust performance in fashion and lifestyle and grocery consumption baskets. The company said it has a total of 15,196 physical stores operational and opened 793 stores during the quarter.

Reliance Jio: Reliance Jio posted a 20.7% rise (adjusted for Interconnect Usage Charges (IUC)) in revenues to Rs 26,139 crore. The cash profit for the quarter was Rs 9,313 crore, up 24% on-year. The average revenue per user (ARPU) for the quarter stood at Rs 167.6 against Rs 151.6 in the previous quarter. Analysts had earlier expected the ARPU to be Rs 164. Total customer base as of 31st March 2022 of 410.2 million (41 crore), a net loss of 10.9 million (1.09 crore) customers. Total data traffic was 24.6 billion GB during the quarter; a 47.5% growth.

Jio had undertaken about a 20% hike across prepaid plans effective December 1, 2021, which improved its Arpu. The full impact of the tariff hike will be reflected in Arpu and financials over the next few quarters as Jio has various long-term validity plans.

Major deals: During the quarter, Reliance Retail Ventures Limited (RRVL) announced the acquisition of an 89% equity stake in Purple Panda Fashions Private Limited, which owns and operates the Clovia business, with an investment of Rs 950 crore through a combination of secondary stake purchase and primary investment.

RNEL, a wholly-owned subsidiary of the Company, entered into definitive agreements to acquire substantially all of the assets of Lithium Werks BV for a total transaction value of US$61 Million including funding for future growth. Viacom18 (a step-down subsidiary) and the Company, announced a strategic partnership with Bodhi Tree Systems, to transform Viacom18 into one of the largest TV and digital streaming companies in India. 

Management Commentary: "I am particularly happy with the progress our company is making in the New Energy and New Materials business. We are forging ahead with the development of our new energy Giga factories complex across 5,000 acres in Jamnagar. And with the strong global partnerships we have, I am confident that Reliance will create sustainable and affordable new energy solutions for India to help her meet growing energy needs while ensuring that we achieve our ambitious target of net carbon zero by 2035," Mukesh Ambani.

Brokerage view:

ICICI Securities: ICICI Securities recommend BUY shares with a target price of Rs 2,960. RIL has the potential to double consolidated EBITDA by FY24E vs FY19 levels and net earnings growing 2.3x over the same period. However, valuations have kept pace, with current PER and EV/EBITDA of 18x FY24E PER and 10.5x EV/EBITDA comfortably above 5-year averages. 

Goldman Sachs: The brokerage firm has a target price of Rs 3,200 per share on RIL. In the current quarter refining and telecom would drive growth with some offsets from petchem. Telecom will see benefits from the tariff hike towards the end of last quarter while refining will see tailwinds from a significant improvement in March which would persist next quarter as well.

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