Buy Reliance Industries Ltd For Target Rs. 1,635 by Prabhudas Liladhar Capital Ltd
Consol EBITDA/PAT inline; Core/Retail under pressure
Consolidated Q4FY26 EBITDA came in line with our estimates at INR441.4bn (PLe: INR443.6bn; BBGe: INR471.1bn), flat YoY and down 4.1% QoQ. Adj. PAT declined 9.0% QoQ and 12.6% YoY to INR169.7bn (PLe: INR169.8bn; BBGe: INR169.4bn). Performance was largely impacted by weakness in the Standalone and Retail segments, partly offset by steady performance in Digital segment. Standalone EBITDA fell 19.7% QoQ and 20.9% YoY to INR119.6bn, driven by lower gas price realizations in KG-D6 and CBM, along with lower volumes in KG-D6, sharp rise in crude premiums, elevated freight and insurance cost. Retail performance remained soft, reporting an EBITDA decline of 1.2% QoQ and growth of 2.8% YoY with an EBITDA margin of 7.7% (-62.1bps YoY / -12.7bps QoQ). Jio ARPU remained flat QoQ at INR214.0, with subscriber additions of 9.1mn, taking the total subscriber base to 524.4mn. New energy project initiatives remain on track. We assign a value of INR111/share to this segment, valuing it at 2x the earlier announced capex of INR750bn. The stock is currently trading at 9.6x FY28E EV/EBITDA. Recent corrections offer a better entry point, with the upcoming Jio IPO adding further traction. Maintain BUY; we lower our target price to INR1,635 (earlier INR1,719) amid soft core/retail business.
Retail:
Net revenues grew 11.1% YoY to INR873.4bn but remained flat QoQ. EBITDA from operations stood at INR66.9bn, up 2.8% YoY but declined QoQ by 1.2%, with an EBITDA margin of 7.7% (down 62.1bps YoY and 12.7bps QoQ). PAT (incl. share of associates & JVs) remained flat at INR35.6bn. On FY26 basis, revenue and EBITDA grew 12.4% and 7.7% YoY respectively
Digital Services:
RJIL revenue grew 2.0/11.2% YoY/QoQ to INR338.8bn. EBITDA and PAT expanded by 2.1%/14.3% and 2.0/10.2% QoQ/YoY, respectively, driven by subscriber additions of 9.1mn on a flat ARPU QoQ. The subscriber base stood at 524.4mn while ARPU was flat at INR214.0. JPL revenue grew 12.6% YoY to INR382.6bn in Q4FY26
Standalone segment:
Q4FY26 EBITDA fell 19.7/20.9% QoQ/YoY INR119.6bn due to lower gas price realization in KGD6 & CBM and lower gas volume in KGD6. FY26 EBITDA declined 6.3% YoY due to lower gas volumes, partly offset by higher gas price realization
New Energy:
Ongoing projects in the New Energy segment remain on track to achieve the targeted capacity. Company signed USD3bn long term green ammonia supply agreement with Samsung C&T for 15 years starting 2029.
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