RIL’s Q3 consolidated Ebitda (+14% q-q, -5% y-y) was 3% beneath our/ consensus estimates. The miss was largely on power organization with standalone Ebitda (+14% q-q, -33% y-y) 12% beneath our estimates. RIL has reorganised its reporting to combine the refining and petchem segments as a single O2C (oil to chemical compounds) segment.
With the changed reporting, it has not disclosed refining GRM, which tends to make quarterly comparisons tough. Petchem was additional sturdy q-q (polymer margins had been record higher, intermediate volume/margins also far better) therefore, we think that refining was probably weaker vs our GRM forecast of $6/bbl ($5.7/bbl in Q2).
Despite carving out of the fuel retail organization and a weak atmosphere (footfalls at 75% of pre-COVID-19, flat y-y), retail Ebitda (+53% q-q, 13% y-y) was 15% ahead of our estimate. But, adjusted for Rs 7.8 bn investment revenue, retail Ebitda was up 15% q-q and 14% beneath our estimates. In Jio, subs addition was muted (gross 25 mn, but net 5 mn), but due to greater blended ARPU of Rs 151 (vs Rs 145 in Q2), Jio Ebitda (+8% q-q, 45% y-y) was 1% above us.
Pandemic nevertheless impacting important segments
Refining margins stay weak, but petchem is seeing a recovery. As the economy additional opens up, volume development ought to get stronger in retail. In Jio, subscriber development ought to choose up for mobile and broadband. But tariff hike is overdue and is a prospective catalyst, in our view.
Outperformance probably to sustain
We reduce FY21F Ebitda 14% on weak operating earnings, but with greater interest revenue/reduce tax, our forecast EPS rises 25% in FY21F & 5-9% in FY22/23F. After down 9% in FY21F, we count on Ebitda to develop 62% in FY22F (low base, volume/margins recovery, Jio tariff hikes), and 28% in FY23F. We count on 33% earnings CAGR more than FY20 to FY23F.
We continue to worth RIL on SOTP basis with unchanged EV/Ebitda multiples (refining 7x, petchem 8x, Jio 11x, core retail at 30x, non-core at 7x). We worth Future’s retail organization at Rs one hundred (unchanged), and adjust our TP for current stake sales in Retail. Our revised TP of Rs 2,400 implies 17% upside. RIL has outperformed NIFTY for the previous six years, and with sturdy development the outperformance will probably sustain. Reiterate Buy.