Shares in Reliance Industries rose over 2 per cent to Rs 1003 on Monday after it reported better-than-expected quarterly profit in its first quarter. Its consolidated net profit increased 13.7 per cent year-on-year to Rs 5,957 crore, bolstered by over 27 per cent y-o-y increase in its oil and gas revenue and higher refining margin.
RIL's net profit was much above the Street expectations. Analysts on an average estimated the company to post a net profit of Rs 5,614 crore, according to Thomson Reuters data.
Reliance Industries reported 7.2 per cent y-o-y jump in its consolidated revenue to Rs 107,905 crore, aided by a whopping 55.2 per cent increase in its US shale gas revenue.
Its revenue from the US shale gas business increased 55.2 per cent y-o-y to Rs 1,617 crore in the Q1 of FY15. But the silver lining is that gross profit from this segment increased 320 per cent to Rs 559 crore, supported by expansion in gross profit margin to 34.6 per cent against 12.8 per cent y-o-y.
RIL's gross refining margin stood at $8.7 a barrel against $8.4 a barrel in the same quarter last fiscal. However, it was lower than $9.3 a barrel reported last quarter.
The retail arm of RIL, which turned in an operating profit last quarter, continued its growth momentum this quarter as well. Revenue from this segment increased 14.5 per cent y-o-y to Rs 3,999 crore and gross profit margin from this segment increased to 2 per cent against negative 0.4 per cent y-o-y.
Analysts believe organized retail and broadband service, which is scheduled to be launched next year, will drive RIL's future profitability.
RIL's subsidiary, Reliance Jio Infocomm, which is the only private player with broadband wireless access spectrum in all the 22 telecom circles of India.
In order to diversify its portfolio, RIL is massively investing in retail, telecommunication and media segment. Mukesh Ambani, chairman of RIL, last month said the company plans to invest $30 billion (Rs 1.8 lakh crore) over next three years.
Brokerages have turned positive post this result. Macquarie has maintained outperform on the stock with a target price at Rs 1,294 per share whereas CLSA has maintained buy on the stock with a target price at Rs 1,250 per share. CLSA says the stock could double as ebitda doubles in 3 years.
Deutsche Bank has also maintained buy on the stock but with a target of Rs 1,210 per share. Deutsche Bank says natural gas price hike remains key near-term catalyst.
Reliance Industries shares have surged 4 per cent in last one week compared to 3.26 per cent surge in the BSE's oil and gas sub-index.
As of 9.20 a.m. RIL shares were up 2.08 per cent at Rs 997.05 compared to 0.54 per cent gain in Nifty. (With inputs from Reuters)