RIL Q3 results: Analysts cut FY20 EPS estimates by 4-6%

NEW DELHI: Most brokerages maintained their positive views on Reliance Industries post the December quarter results, even as a few of them cut their FY20 estimates by 4-6 per cent on weakness in petchem business.

Nomura India noted that petchem weakness was driven by tepid demand and new capacity additions in both aromatic and polymer chains, and firmer naphtha and ethane prices. The near-term outlook appears weak for both polymer and aromatics chains, it said.

For refining business, it said that the GRM of $9.2 barrel was in-line with expectations but reported EBIT of Rs 5,600-odd crore for refining business was 6 per cent higher than its estimates.

“Jio Ebitda of Rs 5,600 crore was 8 per cent below our estimates, driven by lower subs and lower comparable ARPU. With continued market share gains, full impact of tariff hikes over the coming quarters, and ramp-up of FTTH/enterprise services, the outlook remains strong for Jio,” Nomura said while suggesting a target of Rs 2,020 for RIL.

Shares of Reliance Industries closed 3.08 per cent lower at Rs 1,532 on BSE.

RIL on Friday reported a record consolidated net profit of Rs 11,640 crore for December quarter. But the company reported a 1.4 per cent drop in revenue at Rs 1,68,858 crore because of weaker prices of oil and chemicals.

RIL’s refining and petrochemicals businesses saw weaker prices. Revenue from refining and marketing fell 7.2 per cent to Rs 1,03,718 crore but segment EBIT rose 12 per cent to Rs 5,657 crore because it processed more crude oil, earning $9.2 for each barrel it refined, up from $8.8 a year ago.

Morgan Stanley has maintained overweight on RIL with a target of Rs 1,753. This brokerage noted that refining business had a reasonable quarter despite challenges. It said that telecom business numbers were lower than expected.

CLSA has maintained buy rating on the stock with a target of Rs 2,010. It cut its EPS target estimate for FY20 by 6 per cent.

JP Morgan has also cut its FY20-22 EPS estimates for the firm by 4-5 per cent.

“We cut our FY20-21-22 EBitda estimates by 4-2-1 per cent, factoring in weaker petchem margins although due to lower capex run-rate and strong Retail and Jio numbers retain our target price of Rs1,740,” Emkay Global said.

Telecom venture Reliance Jio Infocomm net profit rose 62.5 per cent to Rs 1,350 crore. Its subscriber base grew 32 per cent annually to 37 crore, with each user spending an average of Rs 128.4 a month during the quarter, the company said in a statement.

Meanwhile, with a payments bank licence, 6,000 plus retail stores, 5,000 RJIO touchpoints and various alliances to build technology backbone, RIL has laid the groundwork to disrupt traditional retail, said Edelweiss Securities.

“RIL’s next mega retail venture (Jiomart) has been launched in December with 18 stores in the Navi Mumbai region. This aims to disrupt the $800 billion Indian retail industry by digitising the entire 'kirana' ecosystem through the Jiomart platform. A repeat of RJIO’s telecom success can trigger the next leg of value creation at RIL,” the brokerage said.