A 26% increase in net income to 67,845 crore ($8.8 billion) was led by its three superstar businesses – Oil to Chemical (O2C), Telecom and Retail.
A 26% increase in net income to 67,845 crore ($8.8 billion) was led by its three superstar businesses – Oil to Chemical (O2C), Telecom and Retail.
A refining golden age, tight global gas markets and improving telecom customer quality point to an EBITDA run rate (Earnings Before Interest, Taxes, Depreciation, and Amortization) of over US$20 billion for Reliance Industries Ltd by the end of 2022, Morgan Stanley said on May 9.
Global gas market tightening, increasing traction on digital trading and superior petrochemical spreads, Reliance said in a statement.
On Friday, Reliance Industries Ltd (RIL) reported consolidated EBITDA – a measure of a company’s overall financial performance – of ₹1,25,687 crore (US$16 billion) for the financial year ended April 2021 to March 2022 (FY22), which was a Increase of 29 % compared to the previous year .
A 26% increase in net income to 67,845 crore ($8.8 billion) was led by its three superstar businesses – Oil to Chemical (O2C), Telecom and Retail.
“Refining margins could nearly double and be sustained at high levels for the next half decade, with global fuel markets seeing continued lower supply due to a lack of investment,” the broker said. “We’re seeing an increase in telecom ARPUs (average revenue per user), an improvement in subscriber quality, and a decrease in churn.”
“RIL is producing 18 million standard cubic meters of gas per day from its KG basin, which we expect to ramp to peak production of 30mmscmd over the next two years, with increases beginning January 2023.” increase RIL’s upstream profitability many times over in the coming years through increased global gas prices,” it said.
Gas price for RIL’s KG gas fields rose from $6.13 to $9.9 per million British Thermal Unit in April and the company expects further increases at the semi-annual reset in October. “This should help nearly double EBITDA by the end of 2022,” Morgan Stanley said.
Increasing traction on digital commerce, with 193 million subscribers and a consistent 20% revenue contribution, should also boost margins.
“Digital EBITDA (excluding telecoms) for FY 22 was $200 million, but earnings contribution was limited. We believe that expanding digital revenue is key for RIL to outperform telecom multiples,” it said.
“The new energy business, coupled with five-fold tailwinds, could add $50 billion to market cap in 2022, in our view,” the broker said. RIL’s FY22 investments of $13 billion grew 25% year over year, and Morgan Stanley believes it should be maintained at that level for the next several years.
About 30% of investment went to telecom, 20% to oil for chemicals, 30% to retail and 11% to new energy. Including spectrum acquisition, the total investment was $19 billion.
Net interest costs were close to zero for the first time in nearly three years as net debt declined. Including spectrum liabilities, total debt at the end of fiscal 22 was $10 billion, with Jio’s standalone net debt at $5.4 billion.
“A golden age of refining, tight global gas markets and improving telecom subscriber quality point to an EBITDA run rate in excess of $20 billion by the end of 2022,” it said. “With advances in investments in new energy sources, a $50 billion increase in market cap appears imminent as EBITDA trends pose upside risks.”
