Why Reliance shares failed to perform despite 43% jump in Q2 profit
Reliance Industries’ September quarter profit growth at 43 per cent beat Street estimates, but the stock fell as analysts believe most positives are already reflecting in the price.
Mukesh Ambani-led Reliance Industries Ltd (RIL) on Friday reported consolidated net profit of Rs 13,680 crore in the September quarter (Q2), up 43 per cent from the same period last year, on improved
What analysts liked about the quarterly results was a rebound in the retail segment. What they did not like was loss in net subscribers and weakness in petchem margin.
Net-net, the quarterly earnings could neither raise earnings estimates materially nor the rating of the stock, dragging RIL shares 1 per cent lower in the first hour of trade.
That said, analysts believe the second half of FY22 could be strong, led by boost from tariff hike, JioPhone Next and further recovery in the retail segment.
Their price targets, following Monday’s fall, suggest up to 16 per cent upside in the stock.
On Monday, the scrip fell 2.16 per cent to hit a low of Rs 2,570.10 on BSE. In the last three months, the scrip has rallied 34 per cent.
Jefferies has a target of Rs 3,000 on the stock. It said retail and O2C business profitability improved but Jio’s numbers disappointed. The foreign brokerage tweaked FY23-24 EPS estimates by mere 1 per cent. JPMorgan maintained its ‘neutral’ stance on the stock with a target of Rs 2,465, even as it believes the earnings downgrade cycle for the stock has come to an end.
“We cut Jio’s FY22 estimates but also lowered RIL’s tax rate. Our target increase is driven by rollover, higher multiple for retail (based on peers), introduction of new energy in valuations, higher GRMs, and lower debt. RIL’s macro outlook is steady, though after the recent stock run-up, valuation captures the upside,” Emkay said while suggesting a target of Rs 2,750 on the stock.