Reliance Industries Limited (RIL) shares have been under pressure throughout the year, trading nearly 20% below their 52-week high of Rs 1,611.20. Investors are concerned about slower retail growth, weakness in the oil and gas business, and the absence of strong triggers from the consumer segments.
RIL's performance is being scrutinized across its four major business segments: oil-to-chemicals (O2C), Jio, retail, and upstream oil and gas. Recent quarters have seen the company miss profit estimates, with retail earnings slowing and the oil and gas segment affected by weaker output and softer price realizations. Retail margins have been impacted by festive discounting and investments in hyper-local delivery startups.
The O2C business, traditionally RIL's earnings powerhouse, faces challenges such as high freight costs and Chinese competition. Analysts from Kotak Equities expect RIL's consolidated EBITDA to rise 8.4% year-on-year, driven by a 12.1% increase in O2C EBITDA. Jefferies predicts a 20% rise in O2C EBITDA, citing better petrochemical spreads.
Digital services, particularly Jio, are expected to provide steady support. Nuvama forecasts a rise in digital EBITDA by 11% year-on-year, aided by higher average revenue per user and subscriber additions. The market is keenly watching for updates on Jio's IPO timeline and potential tariff hikes.
Reliance Retail remains a concern, with Kotak expecting a 5.6% year-on-year rise in retail EBITDA but a 2.6% quarter-on-quarter decline. Investors are looking for evidence of profitable growth through store additions and improved margins.
Background
RIL shares have been underperforming due to multiple challenges across its business segments. The company's ability to meet or exceed expectations in its Q1 results could be pivotal in restoring investor confidence.
As RIL prepares to announce its Q1 results, the market is eager to see if the company can deliver a broad-based improvement. A strong performance in O2C and positive management commentary could trigger a relief rally, while continued weakness in retail may delay a bullish outlook.
