Reliance Share Open 2% Higher After Q2 Earnings

Reliance Industries shares rose by over 2% on Monday, 30, October, after Reliance Industries Ltd (RIL) reported consolidated net profit for RIL in the second quarter of the financial year 2023-24 reached ₹19,878 crore, reflecting an increase of 29.7% compared to the previous year, despite a dip in revenue from its oil-to-chemicals business.

The gross revenue from operations stood at ₹2.55 lakh crore in the quarter ending on September 30, compared to ₹2.52 lakh crore the previous year. RIL's earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 30.2%, reaching ₹44,867 crore in Q2FY24.

The net profit attributable to the owners of the company for the quarter was ₹17,394 crore, showing an increase from ₹13,656 crore in the same period the previous year.

Business Segment Performance

1. O2C (Oil-to-Chemicals)  Reliance's O2C business, its largest segment, reported revenue of ₹1.47 lakh crore, reflecting a 7.3% decrease due to a sharp 14% year-on-year drop in crude oil prices, leading to lower product prices. However, the EBITDA for the quarter reached ₹16,281 crore, marking a 36% increase compared to the same period the previous year.

2. Oil and Gas: The company's oil and gas revenue surged by 71.8% in the quarter. This growth was driven by increased gas and oil production and the start of condensate production from the MJ field. Additionally, there was a 6% higher gas price realization in the KG D6 region.

Specifically, the average price for KGD6 gas was $10.46 per MMBTU in Q2FY24, up from $9.86 per MMBTU in Q2FY23. For CBM gas, the average price realized was $13.72/MMBTU in 2Q FY24, compared to $23.34 per MMBTU in Q2FY23. EBITDA increased to ₹4,766 crore, showing a substantial 50.3%  growth on a yearly basis.

3. Jio Platforms: Jio Platforms reported a profit of ₹5,297 crore, up 12%. While revenue from operations reached ₹31,537 cr compared to ₹28,506 cr. Average revenue per user (ARPU) improved by 2.5% year-on-year, reaching ₹181.7 per user per month.

4. Reliance Retail: Reliance Retail posted a net profit of ₹2,790 crore, increased 21%. While revenue from operations is at ₹77,148 crore an increase of 18.8% YoY. Store footfalls reached 260 million from 249 million quarterly basis. In its retail business, RIL plans to expand both its physical and online presence. Mergers and acquisitions continue to be a core theme for expansion.

Debt Reduction

RIL's net debt declined to ₹1.17 lakh crore in September, lower than ₹1.25 lakh crore in March, because of funds raised by Reliance Retail. The company raised 10,347 crore funds from investment firms KKR & Co, Qatar Investment Authority (QIA), and plans to secure more from Abu Dhabi Investment Authority (ADIA) in October.

Positive Analyst Commentary

Morgan Stanley noted, "In-line EBITDA and 2QF24 earnings across divisions, but earnings quality was better than expected in terms of oil-to-chemicals margins, growth in retail sales, and reduction in net debt, with guidance for a slowdown in capex intensity in 2024." RIL's net debt decreased to ₹1.17 lakh crore in September, down from ₹1.25 lakh crore in March, because of funds raised by Reliance Retail.

JM Financial reiterated its 'buy' rating on RIL, emphasizing the company's industry leading capabilities and projecting a robust 14-15 percent EPS CAGR over the next 3-5 years.