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RIL’s Q4FY26 consol EBITDA/PAT of Rs441/170bn missed our estimates by 4%/8% and was down 4%/9% QoQ owing to weaker than expected O2C, upstream, and other segment earnings. O2C was impacted by the Middle East (ME) conflict driving up crude premiums, freight-insurance costs, and auto-fuel under-recoveries, with a 2% EBITDA miss. Upstream saw higher unit opex. Retail revenue saw a 3% beat, up 11% YoY (14% ex-FMCG spin-off impact), though EBITDA was largely inline as margins declined owing to hyperlocal delivery business scale-up. Jio was steady with EBITDA beat of 1%, with subs and margins better than expected and ARPU at a 1% miss. Reported net debt was up 7% each YoY and QoQ, at Rs1.25trn, while Q4 capex was 13% higher YoY at Rs406bn. For FY26, RIL’s EBITDA/APAT grew 8%/6%, while capex was higher at Rs1.44trn. RIL reiterated scaling up its consumer businesses; Jio listing process is advancing, with filings expected soon. Also, the O2C scenario has improved sequentially. We cut FY27/28E EBITDA-APAT by 5-6% each, building in the lower Retail margin and reducing other segments and upstream earnings. Our O2C earnings are largely unchanged, albeit with upside potential. We rollover to Mar-28 earnings; retain BUY on RIL and our TP of Rs1,680.

Results Highlights

i) O2C declined QoQ, due to ME conflict-led dislocations, lower sales, weaker chemical deltas, and higher overheads. O2C feedstock/sales stood at 19.5mmt/17.2mmt, down 5% QoQ each; while EBITDA/mt fell 9% QoQ to USD81.

ii) Upstream EBITDA declined 14% QoQ to Rs42.0bn (5% miss), largely owing to 72% QoQ uptick in opex, while KG Basin’s gas volumes declined 1% QoQ to 25.2mmscmd.

iii) Jio added 9.1mn net subscribers, while ARPU was at Rs214.0 (flat QoQ). JPL’s consol EBITDA rose 4% QoQ to Rs200.4bn. Net access charges rose 2% QoQ to Rs7.4bn, while network opex rose 1% to Rs86.2bn.

iv) Retail EBITDA at Rs69.2bn rose 3% YoY (1% miss), but EBITDA margin declined by 60bps YoY due to ongoing investments in the hyper-local delivery business and weaker revenue mix. Net store addition was 181, with the retail area stable QoQ at 78.3msf. RIL’s other income fell 10% QoQ to Rs44.5bn (13% miss), while the share of MI stood at Rs36.2bn vs Rs36.5bn in Q3.

Management KTAs

The ME crisis disrupted refining as well as propane-butane diversion to LPG and HP-HT gas diversion to priority sectors and SAED. Petchem deltas weakened due to sharp rise in naphtha prices. RIL diversified sourcing (with 40-45% of the ME supply impacted), while time charters insulated it from higher shipping costs. In Jio, 4-5% ARPU growth may continue due to mix change, even without a tariff hike. In Retail, the hyperlocal delivery is rapidly scaling up, with average daily orders up 300%/29% YoY/QoQ, and strong customer addition of 5.8mn in Q4 expanding the registered base by 98% YoY.

Valuation

We value RIL on an SOTP basis, valuing core segments using Mar-28E EV/EBITDA and New Energy/Other segments using EV-IC/EV-EBITDA methodologies. We slightly raise our O2C target multiple while cutting that for Upstream. Key risks: Adverse macros/commodity/currency/policies’ competition; delay in monetization of verticals.

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