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RIL’s consolidated 1QFY24 EBITDA was 1% above JMFe (and in line with consensus) at INR 381bn (flattish YoY but down 1% QoQ) due to lower-than-expected decline in O2C EBITDA and Retail EBITDA being 2% above JMFe. Digital EBITDA was in line; ARPU and subscriber addition were a tad higher than expected. Retail business EBITDA was up 34% YoY on continued strong store addition. Reported consolidated PAT (after minority interest) was also 1% above JMFe at INR 160bn, though it was 6% below consensus due to normalisation of tax rate to 25% (PBT was in line with consensus). The board approved a dividend of INR 9/share for FY23 (vs. 8/share paid in FY22). Capex at INR 396bn in 1QFY24 continued to be high as expected due to 5G rollout; reported net debt was marginally higher QoQ at INR 1,266bn or 0.8x net debt to EBITDA (below the company’s guidance to maintain reported net debt to EBITDA below 1x). We reiterate BUY on RIL (TP of INR 2,900/share) as we believe net debt concerns are overdone, and also because RIL has industry leading capabilities across businesses to drive robust 14-15% EPS CAGR over the next 3-5 years.

* O2C business EBITDA at INR 152.7bn was 1% above JMFe: O2C EBITDA at INR 152.7bn (down 6.3% QoQ and down 23% YoY) was up 1% above JMFe – hence, implied GRM should be largely in line with JMFe at around USD 11/bbl (vs. ~USD 13/bbl implied in 4QFY23). The management highlighted that O2C demand was impacted by destocking on recessionary fears and high interest rates, as well as slower-than-expected ramp-up in China markets. Further, expect downstream petchem margins to remain capped in the near term due to new supply from China. Separately, E&P segment EBITDA was 4% above JMFe at INR 40.2bn in 1QFY24 (up 5.6% QoQ). Further, KG D6 block is currently producing ~27mmscmd of gas and is expected to reach 30mmscmd in the coming months

* Digital EBITDA in line; ARPU and subscriber addition tad higher than expected: Digital segment EBITDA at INR 137.2bn (up 2.5% QoQ and up 17% YoY) was in line with JMFe. Overall ARPU was marginally higher at INR 180.5 in 1QFY24 vs. JMFe of 180 (vs. INR 178.8 in 4QFY23); net subscriber addition was also higher at 9.2mn in 1QFY24 vs. JMFe of ~7mn net addition (vs. net addition of 6.4mn in 4QFY23). Jio standalone 1QFY24 EBITDA was marginally above JMFe at INR 126.6bn (up 2.8% QoQ and up % 14.6% YoY); EBITDA margin was 52.5% in 1QFY24 (vs. 52.4% in 4QFY23). Network cost was in line with JMFe at INR 73.8bn in 1QFY24 (up 2.1% QoQ and up 7.8% YoY) at 30.6% of revenue. However, other expenses came in 3% higher than JMFe at INR 18.8bn in 1QFY24 (up 4.2% QoQ and up 22.9% YoY) due to continued rise in SG&A and other expense. PAT was marginally below JMFe at INR 48.6bn (up 3.1% QoQ and up 12.2% YoY) due to higher depreciation.

* Retail business EBITDA up 34% YoY as strong store addition continues, 2% above JMFe: Retail gross revenue was up 1% QoQ and up 20% YoY at INR 700bn; EBITDA was 2% above JMFe at INR 51.4bn (up 4.6% QoQ and up 34% YoY). EBITDA margin was up 25 bps QoQ at 7.3% in 1QFY24. A total of 18,446 physical stores were operational (with 40 stored added in 1QFY24 with an area of 5mn sq.ft.), taking total area to 70.6mn sq.ft.

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