Ril shares plunge in a weak market. What should investors do when publishing fourth quarter results?

Reliance Industries Ltd (RIL), India’s most valuable company, reported a 22.5% rise in Q4 profit for $Rs 16,203 crore thanks to excellent oil refining margins, steady growth in telecom, digital services and retail businesses. RIL shares fell more than 2% to $2,564 each on the BSE in Monday’s opening bids, trailing Sensex by 800 points.

Revenue from operations of the conglomerate led by Mukesh Ambani increased by 37% to $2.11 lakh crore for the quarter ended March 31, 2022. It has become the first Indian company to have exceeded $100 billion in revenue in a year.

“The stock should benefit from three areas: accelerated EBITDA growth in the retail business, which commands a 4x higher valuation multiple compared to the overall business; Reliance Jio’s steady revenue growth from earnings from market share, rate increases and other fixed/digital routes; and better refining margin which should translate into 20% EBITDA growth in the stand-alone business,” brokerage Motilal Oswal said.

The brokerage firm has reiterated its buy rating on Reliance Industries shares with a target price of $2,935 each. Motilal Oswal said its higher EV/EBITDA multiples of 38x for RIL’s retail segment (core segment) and 19x for digital services underscore new growth opportunities in the digital space and steady market share gains.

“We raised the FY23/24E GRM from $10/bbl each to $16/13 due to issues related to the conflict between Russia and Ukraine and the general tightness in oil product markets. We expect petrochemical earnings to gradually improve as well, as cracker rates normalize and new capacity is absorbed. We also build higher upstream gas prices,” another brokerage, Emkay, said in a note.

The brokerage has maintained its hold/equalweight (EW) rating stance on RIL shares with a target price of $2,850. Emkay Sees Commodities/Currencies Adverse; B2C competition; and new business risks as key risks.

The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of the Mint.

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