Reliance Industries Ltd Stock Analysis | Why Reliance is rising?

Reliance Industries Ltd – Q3 FY2019-20 Financial Highlights

Introduction

In this article, we are going to discuss Reliance Industries Ltd Q3 FY20 Results Update. Let us also analyse the Q3 FY20 financials of Reliance Jio and Reliance Retail, which are the key growth drivers of Reliance Industries’s consolidated revenue and EBITDA.

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Reliance Industries Ltd (RIL) – Q3 FY20 Results Update

Reliance Industries Ltd – Q3 FY2019-20 Results Analysis

Lets analyze the consolidated Q3 FY2019-20 results of the company.

Revenue

• The consolidated revenue of RIL is Rs.1,68,858 Cr. It is decreased by 1.4% YoY but increased on QoQ basis by 2.5%
• Key Drivers of Revenue :
  • Robust revenue growth in consumer business- Jio (28.2%) & Retail (27.4%) amidst economic slowdown
  • Decrease in Refining Revenue (-7.2%) and Petrochemicals segment revenue (-19%) with volatile in crude oil prices amidst geopolitical tensions

EBITDA

• The consolidated EBITDA for Q3 FY20 is almost Rs.23,500 Cr, increased by 4.7% YoY and 1.4% on QoQ basis.
• Key Drivers of EBITDA :
  • Strong growth in consumer EBITDA (49% YoY)
    1. Jio EBITDA – 38% YoY
    2. Retail EBITDA – 62% YoY
  • By continuous capture of growth opportunities in consumer businesses
    1. Retail added 456 stores in Q3
    2. Jio added 1.48 Crore subscribers in Q3 (9 Crore subscribers in last 12 months)
  • Significant decline in EBITDA of Petrochemical business YoY due to
    1. Crude volatility : US-China Trade tensions, Weak global trade
    2. Lower volumes and weak margins

Net Profit

• For Q3 FY2019-20, net profit ie profit after tax (PAT) is Rs.11,640 Cr, increased by 13.5% YoY and 3.4% QoQ.
• The corporate tax rate cut by the government helped the company to pay the taxes at the reduced rate of 21% in Q3 FY20 from earlier rate of around 25-28% in previous quarters.
• The net effect was the rise in effective net profit of the company in Q3 FY20.

Reliance Jio Q3 FY20 Results

• Financial Highlights :
  • For Q3 FY20, a healthy growth of around 28% is seen both in Gross Revenue and Operating Revenue of Reliance Jio as compared with same quarter last year. Sequential QoQ growth is also very encouraging.
  • EBITDA grew almost 38% YoY and 8.4% QoQ on account of strong volume growth.
  • In spite of 31% rise in Profit Before Tax (PBT), Net Profit of the company almost doubled, increased by 63% YoY on account of corporate tax rate cut benefits. The tax rate has come down to 19% in Dec-19 quarter from 35% both in Dec-18 and Sept-19 quarters.
• Key Operating Metrics :
  • As on 31st December 2019, Subscriber base was 37 Crore (32% YoY growth), Net addition of 1.48 Cr in Q3 FY20 and  9 Crore during the last 12 months
  • Average Revenue Per User (ARPU) during Q3 FY20 = Rs.128.4 per subscriber per month
  • Strong customer engagement and volume growth :
    • Total wireless data traffic during the quarter of 1,208 crore GB (40% YoY growth)
    • Healthy Per Capita usage at 11.1 GB & 760 minutes per user per month
  • Largest distribution and sales channel Pan-India and Efficient Service Network

Reliance Retail Q3 FY20 Results

• EBITDA margins improved to 6.3% in Q3 FY20 led by :
  • Strong LFL (Like-for-Like) sales by increasing sales productivity
  • Benefit of scale and operational efficiencies in sourcing and logistics
  • Rapid expansion and deepening roots in Tier 3 and Tier 4 markets
• During Q3 FY20, Reliance Retail added 456 stores taking the total store count to 11,316 stores, with area under operations of 26 Mn.sq.ft
• Key Driving Heads in Retail Business (with 60% Revenue Contribution)
  • Consumer Electronics
  • Grocery
  • Fashion & Lifestyle
• Impactful Consumer Offers resulted into strong sales due to value driven diverse portfolio during the festive period (Oct-Dec)

Conclusion

• As far as consolidated EBITDA mix is concerned, high growth potential businesses of Reliance Industries – Reliance Jio and Reliance Retail have contributed to 37% in Q3 FY20 from earlier 26% share in Q3 FY19.
• Both the business verticals have a great earnings potential being in a consumer business segment.
• In spite of the adverse effects of economic slowdown on the overall corporate earnings from previous 2-3 quarters, EBIT margins (%) and Net profit of both Reliance Retail and Reliance Jio are growing at an exceptional rate.
• This shows the how significant is the role of Reliance Jio and Reliance Retail in the future earnings growth of the Reliance Industries Ltd.