Energy segment of of Reliance Industries (RIL) performed well in Q4FY23, exceeding market expectations for Ebitda by about 5%. This was primarily due to the recovery of chemical margins, a decline in gas costs, and an increase in refining margins. The store expansion was key to growth in retail and Ebitda was in-line. Profit beat of 18% was influenced by a lower tax rate. Net debt of the company remained flat q-o-q. RIL’s F4Q23 Ebitda grew 9% q-o-q and core profits rose 20% q-o-q/y-o-y. Overall earnings were 7% above consensus estimates adjusting for the lower tax rate, which normalised due to a higher tax rate in the earlier part of F23. Full year tax rate stood at 21.3%, slightly higher as tax credits reduced. The last two years of internal cash profits have funded the last two years of $30bn in investments (ex-spectrum). Management highlighted the weaker Re/USD and working capital led to higher net debt. RIL for the first time mentioned it plans to maintain net debt/Ebitda below 1, despite the upcoming investments.
Oil to chemicals saw good improvement in demand, especially on polyester, and retail saw increased footfall with the company guiding for strength in categories of grocery and fashion. E-commerce sustained at 18% of total sales. Upstream gas profitability remained stable and saw support from elevated domestic gas prices. RIL guided for startup of new production from the current quarter, which should help raise earnings. Telecom showed steady operational performance and with 6.4mn net subscriber additions with Ebitda growth largely coming from home broadband penetration and tariff increases.
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Oil to Chemicals: Energy business Ebitda rose 17% q-o-q and 14.4% y-o-y with support from recovery in chemical margins and cheaper US ethane prices, which declined 36% q-o-q. RIL’s implied GRM averaged $12.2/bbl (vs $11.5/bbl in F3Q23) after the negative impact of $0.7/bbl from fuel export tax. Implied chemicals margins rose 43% q-o-q, with Ebitda/ton for O2C business at $116/ton. Olefin/PVC/PET margins could normalise with improved China demand, declining inventories and supply discipline globally. Overall domestic polymer and polyester demand saw 20% and 9% y-o-y growth.
Upstream gas production: Ebitda was Rs 38 bn, slightly lower q-o-q and realisations remain broadly unchanged. New gas field wells are expected to be steadily ramped up in the current quarter and management expects to reach 30 mmscmd of gas production in FY24. 6mmscmd of gas has been has already been sold under the recent e-auction at KM+0.75/mmbtu pricing – the highest price bid to date for RIL.
Retail—steady growth: RIL added 966 new stores with 5.4mnsqft this quarter. Revenue per sqft was,however, still 17% below pre-Covid levels. RIL revenue growth at 20% y-o-y was broadly in line with peers like Dmart and Titan, which saw revenue growth of 20%-25% y-o-y. Ebitda margins were flat at 7.7%. Digital sales mix at 18% has remained largely flat for the past few quarters. Jio Mart application downloads have been ahead of peers’ with 4.8mn during the quarter vs. peers’3.2-4.3mn. Grocery and fashion & lifestyle growth outperformed electronics.
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Telecom – In-line with street: Reliance Jio reported standalone Ebitda of Rs 122 bn, rising 1.7% q-o-q with 6.4mn net subscriber additions, and ARPU at Rs 178.8/month was flat. Ebitda margins were flat sequentially at 52.2%. For FY23, telecom average subscribers stood at a low 425mn (limited net adds of 6.6mn as subscriber quality improved to 92.5%), with revenue growth of 18%, largely by tariff hikes (APRU growth of 18%) and higher mix of broadband subscribers. Ebitda grew 24% and net profit was up 23%. Ebitda margin was 51.4%,up 250bps y-o-y.