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E&P and retail strengthened PAT

Q3FY24 EBITDA up 16% YoY

Reliance Industries’ (RIL IN) EBITDA grew 16% YoY to INR 407bn in Q3FY24 versus our estimates of INR 381bn. PAT grew 11% YoY (flat QoQ) to INR 196bn versus INR 175bn estimated. Positive earnings surprise was led by 50% YoY growth in EBITDA from oil & gas production at INR 58bn (led by ramp-up in KG gas production), a 30% YoY rise in retail EBITDA to INR 63bn (Elara: INR 63bn) and EBITDA for digital services rising 11% YoY to INR 143bn (Elara: INR 144bn). EBITDA for oil-to-chemicals (O2C) was flat YoY as higher gasoline cracks were offset by weak petrochemical margins.

O2C – EBITDA flat YoY

Standalone EBITDA (primarily O2C and E&P) rose 18% YoY to INR 176bn (Elara: INR 153bn), led by a 49% jump in gasoline cracks, favorable ethane cracks and a 10% rise in domestic polymer demand on continuing focus by the government on infrastructure and agriculture.

Digital – EBITDA growth with ARPU and customer addition

EBITDA for Digital Services rose 11% YoY, as average revenue per user (ARPU) grew 2% YoY to INR 181.7, in addition to a 9% YoY rise in customer base to 471mn.

Reliance Retail – New space addition propped growth

Net revenue rose 21% YoY to INR 744bn, led by festive season demand, strong footfall (282mn, up 40% YoY), store expansion and rising consumer discretionary spend. Retail space expanded 21.1% YoY. Sales per sqft rose 2.2% YoY. Revenue growth was led by Grocery (41% YoY), Consumer Electronics (19% YoY) and Fashion Lifestyle (28% YoY). Expect FY23-26E sales/EBITDA CAGRs at 21.6%/23.6%, respectively.

Valuation: reiterate Buy with higher TP of INR 3,354

We up FY25E/26E EPS 4%/5% on better refining outlook due to limited refining supply addition versus demand growth. We reiterate Buy with a higher TP of INR 3,354 from INR 3,194. We assume 22.8x (unchanged) FY26E EV/EBITDA for Retail, 18.0x (unchanged) for Digital Services and 6.5x (from 6.0x) for O2C.

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