Buy Reliance Industries Ltd for the Target Rs 1,490 by Prabhudas Liladhar Ltd
EBITDA beat led by strong O2C performance
Consolidated EBITDA came in ahead of estimates at INR566.2bn (PLe: INR491.4bn; BBGe: INR519.4bn) led by strong performance in O2C business amid tight product cracks. As a result, Adj. PAT increased 22.0% QoQ to INR255.5bn (PLe: INR213.4bn; BBGe: INR213.6bn). Standalone EBITDA surged 55.6% YoY and 14.7% QoQ to INR223.9bn, driven by tight global fuel and feedstock markets and improved polyester margins, partly offset by weak marketing margins, higher crude premiums, freight and insurance costs. Retail performance remained subdued, with EBITDA from operations declining 11.1% YoY while remaining flat QoQ at INR58.9bn, reflecting elevated input costs, ongoing digital investments and the shift in festive demand to Q3FY27. Management expects performance to improve in 2HFY27. In the Digital business, Jio's ARPU improved 1.5% QoQ to INR218.8, supported by healthy subscriber additions of 9.1mn, taking its 5G subscriber base to 300mn. The O2C segment is expected to remain resilient, supported by healthy refining cracks amid persistent global supply disruptions, while weakness in Retail remains a key monitorable. We maintain BUY with a revised TP of INR1,490 (earlier INR1,480), underpinned by resilient standalone performance. We incorporate INR111/share for the New Energy business, valued at 2x the announced capex of INR750bn.
Retail: Gross revenue grew 6.4% YoY; (Adj. for demerger of consumer brands). Reported net revenue rose 5.8% YoY to INR802.2bn. EBITDA from operations declined 11.1% YoY to INR58.9bn, with EBITDA margin contracting to 7.3% vs 7.8% YoY due to planned investment phase, high input-cost inflation, and the festive shift to Q3. Management expects performance to improve in 2HFY27.
Digital Services: RJIL net revenue increased by 10.8% YoY & 3.2% QoQ to INR353.1bn in Q2FY27. EBITDA grew 13.9% YoY and 5.2% QoQ to INR196.7bn, with EBITDA margin expanding to 55.7% vs 54.2% YoY. Subs additions stood at 9.1mn, while ARPU improved by 1.5% QoQ at INR218.8. JPL net revenue grew 11.3% YoY to INR404.8bn, while EBITDA increased 16.6% YoY to INR218.8bn
Standalone segment: Standalone EBITDA surged 55.6% YoY and 14.7% QoQ to INR223.9bn in Q2FY27 due to tight global fuel and feedstock markets, improved polyester margins, partly offset by SAED-capped domestic marketing margins, higher crude premiums, freight and insurance costs. Oil & Gas EBITDA declined marginally by 2.0% YoY to INR49.0bn.
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SEBI Registration number is INH000000933
