Reliance Industries (RIL) reported a consolidated revenue of Rs 2,075.6 billion, showing a decline of 5% y-o-y and 3% q-o-q, which was in line with expectations. The drop in the oil to chemicals (O2C) (segment, caused by a 31% decrease in crude oil prices, was balanced by the sustained growth in the consumer business and increased volumes from the O2C and oil & gas divisions.
RJio witnessed a steady growth in revenue and Ebitda, both increasing by 3% q-o-q, in line with expectations. This growth was mainly attributed to a 2% increase in subscriber additions and a slight rise in the average revenue per user (ARPU). Despite aggressive 5G-led capital expenditures, network operational expenses remained under control during the quarter.
In contrast, O2C’s Ebitda fell 11% below the estimated value, amounting to Rs 164 billion, and experiencing a 22% y-o-y decline in Q1FY24. The outlook for the segment remains uncertain due to capacity additions from China, which are likely to exert pressure on product spreads.
Sources: Company reports, MOFSL estimates
Net debt remained flattish at Rs 1,266.2 billion. This has been restated for the transfer of cash and liquid investments to Jio Financial Services Ltd. We ascribe an equity valuation of Rs 750/share to RJio and Rs 1,500/share to Reliance Retail, factoring in the recent stake sale. We reiterate our BUY rating with a TP of Rs 2,935.
RJio — growth softens in line with expectation
RJio’s revenue and Ebitda showed steady growth of 3% q-o-q each in Q1FY24, driven by a 2% increase in subscribers and a 1% rise in average revenue per user (ARPU). The company’s aggressive rollout of 5G has been progressing well, with over 150k sites and 690k 5G cells covering more than 90% of census towns. The pan-India rollout is on track to be completed before December 2023. Projected capex for FY24E and FY25E remains unchanged at Rs 380 billion and Rs 310 billion, respectively.
Looking ahead, we expect a healthy revenue and Ebitda CAGR of 11% and 14% in FY23-25 period, factoring in a 8% and 3% CAGR for subscriber additions and ARPU growth. The long-term outlook remains positive, driven by market share gains from VIL, potential tariff hikes, and new growth opportunities such as Jiofibre, Airfibre, JioBharat, and other digital avenues that will be facilitated by the 5G rollout.
Reliance Retail – Steady growth as expected
Reliance Retail’s revenue/ Ebitda jumped 21%/34% y-o-y to 622 billion/51 billion with 90bp y-o-y margin improvement. Reliance Retail’s revenue and Ebitda are likely to report 25% and 34% CAGR, respectively, over FY23-25, fueled by accelerated store additions across segments, recovery in store productivity and aggressive foray into digital & new commerce.