InvestorQ : How does Reliance Industries look for investing after the results announcement? Can I buy more shares of Reliance at this point?
shrinidhi Rajan made post

How does Reliance Industries look for investing after the results announcement? Can I buy more shares of Reliance at this point?

Answer
user profile image
Riya Dwivedi answered.
1 year ago


Reliance Q4 highlights

Reliance Industries reported net profits of Rs.10,360 crore in the fourth quarter ending March 2019, which was better than the estimates. The total revenues of the company for the fourth quarter was at Rs.142,000 crore, which was slightly lower than the estimates of Bloomberg. The company reported in line performance in its refining and petrochemicals business. For example, it had gross refining margins of $8.2 in the quarter, which is almost double of what is the Singapore benchmark margin. During the quarter, profits of Reliance Jio went up and the Reliance Retail arm also showed good growth.

Outlook for Reliance stock

The stock of RIL has been on a rally for quite some time and has closed very near to the Rs.1400 mark after the results. While the Saudi Aramco deal is helping valuations, the results have been sort of mixed with a good case for the future. The refining and petchem business will continue to drive the cash flow generation for the Reliance group, most of which has been allocated as investments into Reliance Jio and into Reliance Retail. Reliance Jio now has over 30.4 crore subscribers and compares very effectively with 34 crore subscribers of Bharti Airtel and 40.5 crore subscriber of the Idea-Vodafone combine. Although the ARPUs (Average Revenue per unit) for RIL in the fourth quarter were lower at Rs.126.40 (from Rs.131 in the previous quarter), that is more because the Jio 99 plan has been adding subscribers at the lower end; something other players have been abandoning. However, with the tariffs virtually bottoming out in telecom as a whole, we don’t see further downsides in ARPUs from these levels. In fact, ARPUs could bottom out and bounce.

To buy or not to buy?

Buying RIL stock at current market price will be largely a bet on the ARPUs bouncing higher. The P/E ratio of RIL at 24X historical earnings is close to the highest P/E that the company has add, although it is now being valued more as a telecom and consumer stock rather than as a oil stock. One can look at buying RIL from a perspective of at least 1 year.