ET Now on Reliance Q1 Preview With Probal Sen, Analyst, ICICI Securities

Let’s welcome on board prabhupal sane the vice president equity research at issue securities as well to talk to us about reliance industries earnings profile hi good morning thank you so much for making time and speaking with us um apart from the numbers what are the things that you’re watching out for from the management commentary this time around would the merger

Restructuring be top of mind uh if historical pc that is anything to go a d merger or a restructuring event or a news is typically left to the agm in terms of announcements i would be surprised if it is discussed alongside the quarterly numbers i think what will be important to note is what is the outlook on refining in particular that the company shares because

There has been a huge amount of volatility grm’s in singapore benchmarks have gone from 29 and a half dollars to less than three dollars in a matter of about a month and a half so it would be interesting to hear what sort of outlook they share in terms of you know what is actually happening on the ground and what is the sense they have in terms of refining outlook

Any updates they can share in terms of you know the impact of the windfall tax i don’t know if they’ll share any numbers in terms of dollar per barrel impact but you know what you know what changes and what sort of feedback they are getting from the government with respect to you know the changes in the duty structure and how frequently it will be changed i think

Outlook on that plus of course the regular updates in terms of how the retail business is doing how well it is recovering as well as you know the signs of recovery or strength in the mobility business in terms of either rpo improvement we do expect sub net subs to probably be positive for the first time in the last several quarters for this quarter so you know

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Updates on those businesses will be the key monitorings thanks for that but uh let’s scratch that point further regarding the mobility business that you talked about telecom or you know vertical itself is facing a lot of moving parts with a fresh entry of uh fadhani into the frame not maybe in the consumer mobility business but at least there’s nervousness around

That and there is talk of a fresh round of a you know tariff hike as well um how are you valuing the entire telecom basket well telecom to be honest with you is covered by uh you know a separate team you know so as per the telecom teams uh you know research estimates i can tell you that the financial prospects or you know on an annualized basis continue to look

Fairly strong our telecom team builds in a subscriber level of around 439 subs you know for f523 with an rpo increased to about 185 watt levels from about 150 rupees in 2022. so there is a little bit of tariff built in and you know that translates to a fairly substantial growth in ebitda uh you know about 49 000 crore for this year this financial year compared to

Over 37 000 crore uh in the last year as far as valuation is concerned if i look at the implied valuation that we do uh we value uh you know it on sort of dcf particularly the mobility business which you know translates to something like uh 5.4 trillion of net value stripping out the value that has been sold to other investors which is about 800 rupees a share in

Our overall sotp valuations good good morning prabhu lentar also joining in i appreciate the fact that you look more at the oil chemical part of the business uh but the fact is that you know in q2 what we may also see is a big um outlay from reliance when it comes to fight auctions right just going by the eligibility points maximum it can bid is 1.2 lakh crore

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Rupees um the question i want to ask you that do you think for some time the best that had to come for alliance is behind us just the way the grms are you know the fact that they you start to see commodity deflation also that started to take place and then on top of that a big capex that may have to be incurred because the auctions sorry i didn’t get the entire

Question if i can just encapsulate i think the question was that since there is a large amount of kpix coming in 5g and grms have also probably hit their peak in q1 do prospects for reliance look a little bit weaker for the rest of the year is that correct is the best behind us hello yes that’s exactly what it’s asking you is the best behind us for some time

Well i think uh it depends on what is the base that you’re looking for if you’re looking at uh q1 and then looking at q2 and q3 obviously the numbers for q2 and q3 will not look anywhere near as uh strong as what the q and earnings would look like but if one looks at from a yoi perspective given the earnings that they reported in fi 22 fi 23 and fi 24 earnings

Scagger will still be in the high 20s even if you were to build in fairly conservative grms of some 10 levels factoring in the impact of the duties and the fact that you know there is a demand uh concern that’s now creeping in to both crude prices and product demand but from an earnings growth standpoint i still believe that reliance is said to probably deliver

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Some of the strongest years in its history over fi 23 and 24. your point about the capex is very valid uh the fact of the matter is that after the downstream kpx and mobility kpex got over in fi 2021 there was an expectation that annualized apex would drop down to levels of around 50 to 55 000 crore that has obviously not happened and that’s one of the reasons why

Our rating has always been a little bit more cautious we don’t really have a you know a very aggressive rating on the stock because return ratios actually reflect that higher capex flowing through over the next couple of years as well so the capital allocation continues to be much higher i think than what previous estimates indicated and therefore the earnings

Increase as well as the higher cash flows doesn’t really reflect in uh uh you know the sort of return ratios or the cash flows flowing through in terms of the business okay so we’re all on standby for the numbers to be out this friday reliance always comes out with these numbers on a friday and each quarter gets later and later i uh my co-anchor aisha things will

Be between 7 and 7 30 p.m you had a wager i’m saying between 7 30 and 8 p.m let’s see whatever it is we promise our viewers the best of analysis with the best of experts thanks a lot robert for joining us live today we’re going to take a short commercial break up but stay tuned a lot more coming up on the other side we also going to be in touch with the persistent

Remember their numbers are out you’ve seen the mid tier it companies very much in focus more on that when we return

Transcribed from video
ET Now on Reliance Q1 Preview With Probal Sen, Analyst, ICICI Securities By ICICIdirect