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Reliance Industries Slides Despite Q2 Earnings Meeting Estimates

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Shares of Reliance Industries Ltd. fell as much as 7 percent in early trade even as analysts maintained their stance on the oil-to-telecom conglomerate, amid a weakness in its mainstay refining unit.

The Mukesh Ambani-led company’s standalone profit for the quarter ended September met estimates, led by a strong performance by its petrochemicals business. Its consolidated earnings, however, were driven by the consumer businesses—retail and telecom.

Reliance Industries couldn’t fully capitalise in a quarter when global crude prices were rising. Its core refining business continued to underperform for the fifth straight quarter. The company’s gross refining margin—what a refiner earns by refining one barrel of crude oil—fell despite a stable Asian benchmark. Its premium over the Singapore gross refining margin fell to a 10-month low.

However, its retail business continued to outperform. Net profit of Reliance Jio Infocomm Ltd.—the telecom arm—rose in the September quarter on the back of strong subscriber addition. The conglomerate also agreed to buy controlling stakes in two of India’s cable and wired internet service providers—Hathway Cable and Datacom Ltd. and Den Networks Ltd.—as it looks to disrupt broadband and direct-to-home TV services industry.

Also Read: Reliance To Buy Controlling Stakes In Den Networks, Hathway For Rs 5,200 Crore

Here’s what brokerages had to say about Reliance Industries:

Credit Suisse

  • Maintains ‘Outperform’ with a target price of Rs 1,320 apiece, a potential upside of 15 percent.
  • Refining surprised negatively, while petrochemicals business continues to be strong.
  • Consumer businesses continue to scale well; acquisitions to accelerate broadband ambitions.


  • Maintains ‘Buy’ with a target price of Rs 1,480, a potential upside of 29 percent.
  • Second quarter marginally weaker; a further delay in petcoke gasification plant is disappointing.
  • Reliance Jio’s pace of subscriber addition remains strong; profitability to get better.
  • New investments to facilitate Reliance Jio’s fibre-to-home foray.

IDFC Securities

  • Maintains ‘Outperformer’ and cuts target price to Rs 1,310 from Rs 1,350—a potential upside of 14 percent.
  • Strong petchem metrics and retail results.
  • Key negatives: Lower gross refining margin and higher interest costs.
  • Target price cut to factor in higher debt.

Deutsche Bank Research

  • Maintains ‘Buy’ with a target price of Rs 1,270, a potential upside of 11 percent.
  • Petchem and telecom drive robust growth in second quarter.
  • Feedstock flexibility to boost petchem margins.
  • Commissioning of petcoke gasifiers to improve refining margins from the financial year ending March 2020.


  • Maintains ‘Outperform’ with a target price of Rs 1,315, a potential upside of 15 percent.
  • Second quarter modestly ahead of estimates led by chemicals, retail and Reliance Jio.
  • Petchem margins led by strength in polyester chain and ethane feedstock sourcing.
  • Free cash flow likely to remain elusive and disappoint consensus.

Motilal Oswal

  • Maintains ‘Buy’ with a target price of Rs 1,479, a potential upside of 29 percent.
  • Consolidated earnings before interest, tax, depreciation and amortisation in line, led by healthy retail performance.
  • Robust volume growth, healthy deltas drive petchem profitability.
  • Reliance Jio to focus on subscriber growth in feature phone and postpaid segment.
  • Announced acquisition of cable companies to fasten fibre-to-home rollout.

On Den Networks, Hathway Deal

IDFC Securities

  • Reliance Industries’ deal is the best thing that could happen to Hathway Cable and Den Networks.
  • Deal to address leverage, capex and competition issues.
  • Reliance Industries invested in multi-system operators to get access to local cable operators given their fragmented nature.
  • Well capitalised and consolidated multi-system operator space is negative for broadcasters and direct-to-home players.
  • Moves Hathway Cable and Den Networks to ‘Under Review’ as more clarity required on role of these companies.
  • Dish TV: Maintains ‘Outperformer’ and cut target prcie to Rs 84 from Rs 111—a potential upside of 67 percent.

Bank of America Merrill Lynch

  • Dish TV likely to be vulnerable from Reliance Industries’ acquisitions.
  • Sees pressure on high average revenue per user/high-definition subscribers.
  • Hathway Cable and Den Networks to use funds to upgrade existing infrastructure.

Also Read: Q2 Results: Reliance Jio Profit Rises On Aggressive Subscriber Additions 

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