Reliance Industries Share Performance Post Q2 Results: A Comprehensive Analysis
Reliance Industries Ltd., the Mukesh Ambani-led conglomerate, has been a stalwart in the Indian stock market. The company's recent Q2 results have sparked a mixed reaction among investors, with shares experiencing a slight dip. In this article, we delve into the key highlights of Reliance's Q2 performance and analyze the factors influencing its share price.
On October 15, 2024, the Indian stock market opened on a positive note, with the S&P BSE Sensex climbing 194.75 points to 82,167.80 and the NSE Nifty50 rising 38.30 points to 25,166.25 . However, Reliance Industries shares fell nearly 1% after reporting a 5% drop in net profit and .
Key Highlights of Reliance's Q2 Results
1. **Net Profit Decline**: Reliance Industries reported a 5% drop in net profit for the second quarter of FY25. This decline was primarily due to a 23% decrease in operating profit in the oil-to-chemicals (O2C) segment and .
2. **Revenue Growth**: Despite the decline in net profit, Reliance's revenue from operations increased by 0.2% year-on-year (YoY) to Rs 2.35 lakh crore in the reporting period .
3. **Segment Performance**: The O2C segment faced significant challenges due to an unfavorable demand-supply balance, leading to a sharp 50% decline in transportation fuel cracks and continued weakness in downstream chemical deltas .
4. **Digital Services**: On the other hand, Reliance's digital services arm, Jio Platforms, put up a solid show in the September quarter, led by strong ARPU growth of 7% YoY. The segment clocked 23% growth in its net profit after tax at Rs 6,539 crore, while revenues improved 18% YoY to Rs 37,119 crore .
5. **New Energy Initiatives**: Reliance also announced that the first of its new energy giga-factories is on-track to commence production of solar PV modules by the end of this year. This move is seen as a significant step towards diversifying the company's revenue streams and reducing its reliance on traditional energy sources and .
Market Reaction and Analyst Views
1. **Market Reaction**: The market reaction to Reliance's Q2 results was mixed. While the company's net profit was better than expectations, the O2C business continued to face challenges due to lower petchem margins. The consumer business was also soft, despite an improvement in EBITDA from last year .
2. **Analyst Views**: Despite the soft Q2 results, several brokerages maintained a positive outlook on Reliance Industries. CLSA maintained its 'outperform' rating on Reliance with a price target of 3,300, citing the stock's conservative valuations post a 15% correction . Bernstein also maintained an 'outperform' rating with a price target of 3,440, despite the earnings miss .
3. **Brokerage Recommendations**: Out of the 37 analysts covering Reliance Industries, 28 have a 'buy' recommendation, six say 'hold', and three have a 'sell' recommendation. This indicates a generally positive sentiment towards the stock despite the recent decline .
Key Triggers for Reliance's Future Growth
1. **Jio's Performance**: Jio's performance and tariff hikes have been a significant driver of growth for Reliance. The upcoming tariff hike for Jio is expected to support its ARPU growth and contribute to the company's overall revenue .
2. **Retail Business**: The retail business, although muted in the second quarter, is expected to recover with the recent rationalization of unprofitable stores and B2B operations. Increased footprint, category additions, and a potential foray into quick commerce are expected to drive growth in this segment .
3. **New Energy Initiatives**: The commencement of new energy operations by March 2025 is another key trigger for the stock. Reliance's new energy giga-factories are expected to play a crucial role in diversifying the company's revenue streams and reducing its carbon footprint .
4. **Potential IPO of Jio**: The potential IPO of Jio Platforms is also seen as a significant trigger for the stock. This move could unlock substantial value for Reliance shareholders and provide a new avenue for growth .
Conclusion
In conclusion, while Reliance Industries' Q2 results were soft, the company's future growth drivers remain intact. The upcoming tariff hike for Jio, sustained growth in retail, and the commencement of new energy operations are expected to be key triggers for the stock. Despite the challenges faced by the O2C segment, Reliance's diversified business portfolio and positive analyst views suggest that the stock has significant potential for growth in the long term.
