Reliance Industries, the only listed entity which has more than Rs 10-lakh crore market cap, reported highest ever quarterly profit of Rs 11,640 crore (up 3.4 percent QoQ and 13.5 percent YoY) in Q3FY20 driven by strong telecom, retail and refining business. Higher other income and lower tax cost also supported profitability.
Revenue from operations during the quarter grew 2.5 percent sequentially (down 2.5 percent YoY) to Rs 1.57 lakh crore with gross refining margin at $9.2 a barrel (down by $2 a barrel QoQ and up $4 a barrel YoY.
The stock was quoting at Rs 1,550.00, down Rs 30.65, or 1.94 percent on the BSE at 1046 hours IST.
Most brokerages retained their bullish stance on the stock with CLSA and Nomura, the only brokerage which expects the stock to move above Rs 2,000 mark by year-end after quarterly earnings.
"The company reported first positive free cash flow in over six years and its capex falls below cash PAT drove a cut in net debt," CLSA said, adding Jio's EBITDA missed by 3 percent but retail had another stellar quarter.
Company is a growth leader with a clear GARP (growth at a reasonable price) story and the closure of $40 billion in deals would be a trigger, said the global brokerage which has a buy rating on the stock with a target price of Rs 2,010, implying 27.21 percent potential upside from current levels.
Japanese brokerage Nomura also has a buy rating on Reliance with a target price of Rs 2,020 as numbers were largely in-line with petchem much weaker, but offset by better refining & retail.
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"Refining earnings were ahead of estimates due to lower operating expenses and higher volumes, while Jio was weaker than our expectation, but outlook remained strong," it said, adding retail business saw another strong quarter and margins will expand further.
Top telecom operator Reliance Jio registered a whopping 36.4 percent sequential growth in Q3 profit at Rs 1,350 crore and its earnings before interest, tax, depreciation and amortisation (EBITDA) increased 8.4 percent quarter-on-quarter to Rs 5,601 crore and margin expanded by 80bps to 40.1 percent in Q3FY20.
Jio's average revenue per user (ARPU) for the quarter stood at Rs 128.4, higher by 7 percent over Rs 120 in September quarter. It added 14.8 million subscribers during the quarter against 23.9 million users addition seen in previous quarter, taking its total subscriber base to 370 million at the end of December quarter.
Reliance Retail continued to report stellar growth for the quarter as revenue grew by 27.4 percent YoY (up 10 percent QoQ) to Rs 45,327 crore with accelerated store roll-out and strong LFL sales.
Mukesh Ambani said the company was making good progress on the value unlocking initiatives announced earlier while building on sustainable growth platforms for shareholders.
Kotak Institutional Equities also reiterated its buy call on the stock with a target of Rs 1,850 as Q3 performance was operationally muted across segments except retail.
Free cash flow turned positive after seven years led by an accelerated decline in capex and company may benefit meaningfully from plausible consolidation in telecom, it said.
While having an overweight call on the stock with a target of Rs 1,753, Morgan Stanley said earnings were 6 percent above its estimate, mainly due to lower tax rate.
"Better refinery utilisation rates were offset high telecom subscriber churn. Retail & chemical businesses had in-line margin trends," it added.
Credit Suisse, the only brokerage having neutral call with a target at Rs 1,400, said Jio reported lower-than_expected result on ARPU, subscribers & margins, but Jio will become net recipient of access charges from Q4FY20.
Strong margin improvement in retail was due to better mix. Gross refining margin declined QoQ due to lower middle distillate crack and the outlook on refining margin depends on pick-up in demand for marine gas oil, the brokerage said.
Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.