Reliance Industries share price slips 3% post Q4 FY18 results; here is what analysts said

Reliance Industries share price slipped over 3 per cent on Monday as RIL's gross refining margin (GRM) came in below expectations, while its telecom unit Reliance Jio's average revenue per user (ARPU) continued to fall amid price war among telecom companies. RJio's ARPU fell further to Rs 137 in Q4 FY18. However, RJio saw profits rise to Rs 510 crore, up 1.2 per cent over third quarter earnings.

Reacting to the numbers, Reliance Industries share price slipped 3.38 per cent to Rs 961.10 on the BSE. Brokerages, however, remained positive on the long-term prospects of the stock. The stock had hit its lifetime high of Rs 1,010.70 in Friday's trade ahead of Q4 results. 

Brokerage Kotak Institutional Equities was dissapponted with RIL Q4 FY18 results and reiterated 'reduce' rating on the stock with a target price of Rs 930 from Rs 900 earlier. "Elevated capex (Rs 0.79 tn), still large capital-WIP (Rs 1.87 tn), high effective debt (Rs 2.35 tn) and Reliance Jio’s balance sheet (Rs 2.54 tn) take the sheen away from RIL’s remarkable 17 per cent growth in EPS to Rs 59 in FY2018," said Kotak in a results review report.  

"We expect growth trajectory to slow down from exit-quarter EPS of Rs 16 until Jio picks up, given near full utilisation of petchem projects, limited upside to downstream margins and likely subdued contribution from gasifiers," it added.

Brokerage Motilal Oswal Securities, however, maintained buy on the stock. It expects RIL's Singapore GRM, which recently corrected, to reamain strong at $6 per barrel during FY19-20. "RIL, with its higher complexity and flexibility is
expected to generate higher GRM of $11-12/bbl during FY19-20E," it said. 

On Reliance Jio, MOSL said that the recent ARPU cuts may have been disappointing, over the next 2-3 quarters, competitive intensity may abate, increasing industry revenue pool and offering strong growth potential.

MOSL maintained buy on the stock with a target price of Rs 1.150 per share. 

RIL: Brokerage Target Prices

"On FY20E basis, the stock is trading at 13.3x consolidated EPS of Rs 75 and EV/EBITDA of 8.5 times. Our SOTP-based fair value stands at Rs 1,150/share," it said. 

RIL on Friday reported its highest quarterly net profit of Rs 9,435 crore on record earnings from petrochemical and retail business and rise in profitability of its upstart telecom unit, Jio. Consolidated net profit of Rs 9,435 crore, or Rs 15.9 per share, in January-March was 17.3 per cent higher than Rs 8,046 crore, or Rs 13.6 a share, in the same quarter of the last fiscal year. 

The owner of world's largest refining complex earned $11 on turning every barrel of crude oil into fuel in January-March as against a GRM of $11.5 in the same period last year. The lower GRM pushed down pre-tax segment profit by 11 per cent to Rs 5,607 crore.

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While its core petrochemical business posted record quarterly pre-tax profits, earnings from the oil refining business dipped on squeeze in margins.

However, the surprise package was retail which clocked over 200 per cent rise in pre-tax profit.