Reliance Industries has received an outperform rating from CLSA, with the brokerage firm setting a target price of ₹1,650 per share. This rating indicates CLSA's positive outlook on the oil-to-petrochemicals conglomerate's performance prospects.

CLSA's Assessment

The following table summarizes CLSA's recommendation:

Company Profile

Reliance Industries operates as a diversified conglomerate with significant presence in the oil refining and petrochemicals sector. The company is classified as a large-cap stock in the refineries sector, reflecting its substantial market presence and operational scale.

Market Implications

CLSA's outperform rating suggests the brokerage expects Reliance Industries to deliver returns above the broader market average. The ₹1,650 target price provides investors with a specific valuation benchmark based on CLSA's analysis of the company's fundamentals and growth prospects.

Reliance Industries delivered a strong top-line performance in Q3 with consolidated revenue from operations rising 11% year-on-year to ₹2.69 lakh crore, though net profit growth remained muted at 0.56% YoY to ₹18,645 crore. The company posted EBITDA of ₹50,932 crore, marking 6% year-on-year growth, primarily driven by robust performance in the Jio telecom business and Oil-to-Chemicals (O2C) segment. Market expert Sushil Choksey from Indus Equity Advisors noted that the results were broadly in line with Street expectations.

Financial Performance Overview

The diversified conglomerate showed steady business momentum with sequential improvements, as net profit rose 3% quarter-on-quarter from ₹18,165 crore and revenues increased 4% sequentially. However, higher operational costs partially impacted profitability during the quarter.

O2C Segment Powers Performance

The O2C business demonstrated exceptional strength with EBITDA surging to ₹16,507 crore, significantly higher than ₹15,008 crore in the previous quarter and ₹14,402 crore year-on-year. Choksey highlighted the division's strength, stating that "oil-to-chemicals division throughput was exceeding 20 million and GRM was on a stable note. The cash cow continues to energise the entire expansion of Reliance."

Digital Services Maintains Growth Trajectory

Jio delivered steady performance with wireless revenue growing 8% year-on-year, supported by robust subscriber additions. ARPU improved across multiple timeframes, rising 5.1% year-on-year and 1.1% quarter-on-quarter to ₹213.70 per user. Choksey noted that "Jio was stable and positive" and identified tariff hikes as the key lever for future earnings growth, especially with Bharti Airtel's ARPU remaining about 20% higher than Jio's.

Retail Faces Temporary Headwinds

The retail segment experienced some pressure during the quarter, which Choksey attributed to temporary factors. "Retail was a little disappointing because GST changes had an impact for one month and the festive season had shifted to Q2," he explained. However, he believes the weakness is transient, noting that "expansion mode is on track" with the number of stores nearing 20,000 and per square foot sales remaining on track.

Expert Analysis and Market Outlook

Choksey provided a comprehensive assessment of the company's consolidated performance, noting that "yearly EBITDA without other income at ₹1.85 lakh crore and debt nearing around ₹1 lakh crore seem to be on track." He suggested a sum-of-parts valuation target of ₹1,700 to ₹1,850, supported by favorable currency dynamics and high replacement costs for similar global complexes.

Regarding the new energy vertical, Choksey indicated that "management commentary suggests that the new energy vertical is beginning to take shape and could see visible traction over the next six months."