Shares of Reliance Industries (RIL) fell 4% on the BSE during Monday’s intraday trading amid high volumes, reaching a nine-month low of Rs 1,289. The market capitalization-based stock price of the nation’s most valuable corporation is currently at its lowest point since January 10, 2024. From its 52-week high of Rs 1,608.95 (adjusted to 1:1 bonus) reached on July 8, it has dropped 20%.
RIL announced modest results for the quarter ended September 2024, causing the business to tumble 7% in a single month, underperforming the market. By contrast, the BSE Sensex experienced a 3.9% decline within the same time frame.
For the six months ending in September 2024, RIL’s consolidated earnings before interest, tax, depreciation, and amortisation (Ebitda) were Rs 86,682 crore, up from Rs 86,715 crore during the same period in the previous fiscal year.
During the first half of fiscal 2025, the company’s overall financial and operating performance stayed consistent. While operating profitability were steady compared to the same comparative period for the previous fiscal year, revenue growth was robust at 6%.
However, the company’s oil to chemical (O2C) division has suffered a slowdown in operating profitability, with margins reduced due to a severe decline in product cracks brought on by an increase in product supply and a decline in worldwide demand.
Furthermore, according to CRISIL Rating, the retail category’s growth was restrained by low demand, especially in the Fashion & Lifestyle area.
Analysts and company officials predict that RIL’s O2C business would continue to face pressure for the rest of the current fiscal year. In an after-results analysis on RIL, analysts at BOB Capital Markets wrote, “Management guidelines for softness for the next couple of quarters in both retail and O2C businesses.”
The brokerage firm stated that it has reduced its EBITDA expectations for FY25 by 2.9% and FY26 by 2.3% in light of the Q2 results, including the drop in margins in the O2C sector and the anticipated slower growth in the retail division for another two quarters.
According to experts, Chairman Mukesh Ambani’s goal of growing the company twofold by FY28 is supported by the aggressive growth plans and shown execution skills, which provide an atmosphere conducive to substantial EPS growth over the next five to seven years.
In its results report, ICICI Securities stated that it has projected consistent growth across all segments in its current forecasts, with an EPS CAGR of 14.2 percent during FY25–27E.
However, given the possibility of aggressive “New Energy” capital expenditures beyond the currently stated Rs 75,000 crore and the ongoing growth of Retail/JIO infrastructure, the brokerage firm’s cautious approach has not changed, suggesting that FCF yield/RoCE increase would probably stay back-ended.
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