RIL posts strong operating quarter
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Reliance Industries Limited (RIL) reported a strong operating quarter with a slight beat at the EBITDA level, JP Morgan said in a report.
Reported PAT was a large beat driven by exceptional gains on the exit of shale assets. Jio reported another miss with net sub loss of 8.5 million subs though this was offset by 6 per cent quarter on quarter increase in ARPUs. Given the continued strength in Refining, higher gas prices and telecom tariff hikes, we would expect operating earnings to further improve from here. RIL's capex remains at sharply elevated levels, JP Morgan said.
The 3QFY22 highlights were a strong O2C, E&P and Retail but Jio again a soft quarter: RIL reported consol EBITDA/PAT at Rs 297 billion/Rs 185 billion (+14 per cent/+36 per cent q/q) vs consensus at Rs 287 billion/Rs 152.6 billion.
Capex stood at Rs 275 billion (+10 per cent q/q). YTDFY23 capex stood at Rs 693 billion and does not include spectrum purchase of Rs 436 billion. Hence even with a pick up in operating earnings RIL continues to generate negative FCF (Net Profit+Depreciation-Capex), JP Morgan said.
O2C EBITDA at Rs 135.3 billion (+6 per cent q/q) was broadly in line with the company highlighting strong refining cracks but softer Petrochem. We expect this trend to continue. E&P EBITDA surged q/q (+90 per cent) given the gas price reset seen in Oct-21 and should remain strong into FY23.
Retail reported 27 per cent q/q revenue growth with EBITDA at Rs 38.2 billion (+31 per cent q/q) and EBITDA margins at 7 per cent. All time high revenues were seen across all consumption cohorts. Some 837 stores were added in the quarter taking total stores to 14,412.
On a net basis Jio reported 8.5 million sub loss (2Q sub loss of 11Mn) which RIL attributed to SIM consolidation. ARPUs were +6 per cent q/q and underlying EBITDA at Rs 95 billion was a miss against JPM estimates. While the full benefit of the higher tariff hikes would flow through to earnings over the next two quarters, JPM (and likely consensus) estimates build in both higher ARPUs and subs and hence continued subs loss would be a negative, the report said.
