Mukesh Ambani led Reliance Industries (RIL)’s Q3FY23 consolidated revenue was in line with our estimate, up 17% y-o-y/down 6% q-o-q. Ebitda grew 19% y-o-y/13% q-o-q driven by a big beat in standalone result. Adjusted for an extraordinary gain in Q3FY22, the PAT declined 3% y-o-y as the improvement in operating margin was offset by higher depreciation and finance cost.
RJio’s revenue/Ebitda rose 2%/5% sequentially led by 1% increase in subscribers and marginal rise in ARPU. Controlled network cost and SUC benefit resulted in 120bp sequential Ebitda margin expansion to 52.2%. PAT grew 3% sequentially because of high depreciation charges due to 5G deployment in Q3FY23.
Reliance Retail saw healthy revenue/Ebitda growth of 19%/25% y-o-y with improving footfalls and growing digital business; however, fashion and lifestyle segment remained soft during the quarter. Oil-to-chemical (O2C) Ebitda came in 38% above our estimate at Rs 150 bn; Ebitda/mt stood at $113 (+7% y-o-y, +21% q-o-q). Revenue growth was constrained as throughput was lower because of a planned maintenance and inspection activity turnaround. Production meant for sale stood at 16.2mmt in Q3FY23. We have rolled over our SOTP valuation base to Dec’24. We value the refining and petrochemical segment at an EV/Ebitda of 7.5x, arriving at a valuation of Rs 879/share for the standalone business. We ascribe an equity valuation of Rs 809/share to RJio and Rs 1,270/share to Reliance Retail, factoring in the recent stake sale. Our higher EV/Ebitda multiples of 35x for Retail and 15x for Digital services underscore new growth opportunities in the Digital space and steady market share gains. We reiterate our BUY rating on the stock with an SoTP-based TP of Rs 2,800.
Also Read: Akash Ambani’s Reliance Jio, Isha’s Retail Q3 revenue jump over 17%; what led growth, what are future plans
RJio – growth softens with higher churn; PAT misses by 5%
The company is aggressively rolling out 5G with a target to cover pan-India by Dec’23. We expect revenue/Ebitda CAGR to soften to 12%/17% over FY23-25 due to slower subs/ARPU CAGR of 6%/ 5%, respectively. Going forward, accelerated market share gains from VIL, tariff hikes, Jiofibre subscriber growth and other digital avenues triggered by 5G rollout could be the key positive catalysts.
Reliance Retail core revenue/ Ebitda grew 16%/ 34% y-o-y. Footfalls at 201m in Q3FY23 were the highest ever but the discretionary category performance was soft. Digital and new commerce grew 38% y-o-y, contributing 18% of revenue. It opened 789/608 gross/net stores during the quarter, taking the total store count to 17,725.
Grocery business/consumer electronics delivered robust revenue growth of 65%/45% YoY, respectively, while Pharma posted a healthy revenue growth of 93% y-o-y. However, Fashion & Lifestyle remained muted with 13% YoY revenue growth, hit by a delay in winter. Digital and New Commerce business grew 38% y-o-y with contribution to revenue standing at 18% during the quarter. Further, 5G investment should intensify with the target to achieve pan-India rollout by Dec’23. The oil and gas segment has seen tailwinds with better margin as well as higher and sustained production coupled with opening up of China that could sustain earnings. Using SOTP, we value the refining and petrochemical segment at 7.5x on Dec’24E EV/Ebitda to arrive at our valuation of Rs 879/share for the standalone business.
Tags: 上海花千坊1314FSK, 嘉定紫霞休闲会所价目表LB, 重庆性息JU, 阿拉爱上海足浴推油flTS