UBS Sees Broad-Based Growth For Reliance Industries In Q3, Maintains 'Buy'
The consensus seems to underappreciate the upcoming integrated manufacturing ecosystem for new energy business, says UBS.
Strong performance across segments is expected to drive Reliance Industries Ltd.'s Ebitda growth in the third quarter ended December, according to UBS Securities India Pvt.
The conglomerate is expected to conquer Ebitda of Rs Rs 34,100 crore in the third quarter of FY2023 with 15% year-on-year and 9% quarter-on-quarter rise, the research firm said in a note. This is alongside sequential earnings expansion across energy and consumer businesses, it said.
UBS maintained a "buy" rating on the stock, saying the consensus seems to underappreciate the upcoming integrated manufacturing ecosystem for new energy business.
The target price of Rs 3,250 remains unchanged given that investors are not pricing in retail segment's revenue growth potential from rapid store expansion, business-to-business electronic commerce revenue growth and private labels.
The brokerage predicts that oil-to-consumer earnings will recover sequentially led by higher refining margins, though partly offset by fuel export taxes and lower petchem spreads. Reliance’s oil-to-chemicals business includes crude refining and integrated petrochemicals along with a petroleum retail marketing joint venture.
According to UBS:
Reliance's financial estimates of the retail revenue projects an escalation of 67.26% from FY23 to FY25.
Longer-than-expected delay in refining and petchem projects could affect volumes and earnings in the coming quarters.
Revenue from digital segment is expected to increase over twofold to Rs 1,61,300 crore in FY26.
In the third quarter, Reliance's consolidated revenue is expected to rise 21% year-on-year.
Shares of Reliance Industries fell as much as 0.77% and were trading 0.63% lower at 11:59 a.m. compared with a 0.11% gain in benchmark Nifty 50.