After a weak Q1, we anticipated a recovery in petchem and retail, whereas refining was anticipated to be weak. Reported Q2 refining earnings were a lot weaker than our estimate. However, petchem, Jio and retail earnings were higher than our expectations. Standalone Ebitda (+8% q-o-q, -44% y-o-y) and consolidated Ebitda (+12% q-o-q, however -16% y-o-y) were ~3% forward of our estimates.
Consolidated adjusted PBT (+28% q-o-q, -30% y-o-y) was 10% beneath our estimate, because the decline/improve in curiosity value/different earnings after the current stake sale were decrease than our estimates. However, consolidated adjusted PAT of Rs 95.6 bn (+16% q-o-q, -15% y-o-y) was 10% forward of our estimate on account of a very low efficient tax rate.
Refining very weak with 10-year low GRM; petchem recovery a lot better: Reported GRM of $5.7/bbl (vs $6.3 in Q1) was the bottom in over a decade. Also, throughput at 15.3mmt (-8% q-o-q) was decrease on account of shut-down. Refining Ebit of Rs 17.5 bn (-36% q-o-q,-66% y-o-y) was lowest in almost eight years. Compared with the two-decade low of -0.9/bbl in Q1, SG advanced margins at $0.05/bbl recovered marginally, however were nonetheless very low. Margins are weak in Q3 to date and close to time period outlook is weak.
Petchem noticed a lot stronger recovery, with Ebit of Rs 48.4 bn up 45% q-o-q. Reliance benefited from a robust revival in home demand, resulting in a a lot greater placement of merchandise within the home market. Also, margins were stronger for PVC, PE and ethane cracking.
Jio did marginally higher than our expectation: Standalone income at Rs 175 bn (+6% q-o-q, +33% y-o-y) was 2% forward of our estimate, pushed by a 3% q-o-q enchancment in ARPU to Rs 145 and a pair of% q-o-q progress within the wi-fi subscriber base to 404 mn. Ebitda at Rs 75 bn (+7% q-o-q, +46% y-o-y) was 2% forward of our estimate.
With continued market share positive aspects, ramp-up of FTTH/enterprise companies, tie-ups with strategic traders, in-house 5G capabilities and roll-out of digital ecosystem, we consider the outlook stays robust.
Retail noticed higher than anticipated recovery: Compared with simply 50% shops in Q1, almost 85% shops were operational in Q2. Footfalls are steadily recovering (reached 85% of pre-COVID-19 ranges in September), however ranges stay low for trend and way of life. Revenue at Rs 392 bn (+24% q-o-q) was down simply 5% y-o-y, and may attain pre-COVID-19 ranges quickly. Ebitda at Rs 19.9 bn (+83% q-o-q, -15% y-o-y) was 18% above our estimate.
Net debt reduces sharply: With funds influx of Rs 1,467 bn ($20 bn) from transactions in H1, RIL’s web debt fell to Rs 935 bn as at end-Sep, and likewise different monetary liabilities like capex collectors have declined sharply. With additional influx of `302 bn for Retail transactions in Q3, and steadiness commitments of Rs 736 bn (for Jio and Rights concern), RIL is successfully debt free.
Valuation: We use an SOTP methodology to worth RIL’s completely different companies. For refining/ petchem, we use 7x/8x common of FY22-23F EV/Ebitda. We use DCF to worth the E&P enterprise. We worth R-Jio at 11x common FY22-23F EV/Ebitda and Reliance Retail at 27x common FY22-23F blended EV/Ebitda. Our TP is Rs 2,450. The benchmark index for this stock is Nifty 50.