Jio ARPU improved to Rs 151 (IDBIest Rs 150) from Rs 145 QoQ while net subscriber addition was on a lower side at 5.2mn (gross addition of 25.1) to reach 410.8 million at the end of Q3FY21. Retail business margin improved sequentially to 6.3% (excl investment income) from 5.2% in Q2FY21 (6% YoY). Polymers margins were at a record level in Q3 led by PVC and PP while intermediate spreads showed some improvement. Polyester and polymer both saw significant improvement in domestic demand and expect it to improve further. Also, with vaccination drive, continuous lower global refinery run-rate, we expect product inventory to see some dip from FY22 which is expected to boost refining margins, said IDBI Capital.
Jio has seen 11%/18%/16% improvement in subscriber base/ARPU/data consumption in the past one year. Though, pace of net subscriber addition has slowed down but still it has many levers to grow mainly a tariff hikes in near term. Also, faster ramp-up of an attractive FTTH, integrated solutions for Enterprises and IoT solution for Home are few other levers which would continue to drive Jio profits. We expect its ARPU and EBITDA to grow at a CAGR of 12% and 45% respectively over FY20-FY23, it added.
The company's 56% of incremental EBITDA growth comes from consumer business while Consumer contributed nearly 51% to its EBITDA. RIL's omni-channel strategy along with revival at fashion & lifestyle and faster retail outlet addition (added 327 stores to 12,201) to led to an EBITDA growth of 12% CAGR during FY20-FY23E.
Commenting on the result review, the broking firm IDBI Capital said, "Reliance Industries (RIL) Q3FY21 result was below our estimates at operational level (in line with consensus) while PAT was higher than our and consensus estimates on the back of deferred tax reversal and lower interest cost. Higher volume in O2C, robust polymer margin, higher ARPU and lower effective tax rate along with lower interest and higher other income swelled net profit."
"However, the company's new reporting structure (integrated refining & petrochem division to O2C business), led to non-disclosure of GRM. Lower crack spreads and weaker retail division (excl investment income) performance during Q3 was a disappointment. RIL's expanding FTTH, Enterprise solutions and IoT solution for Home to gain market share in long run.
"With vaccination drive, we expect GRM to improve further led by pick-up in economic activity. We raise PAT estimates for FY21E by 16.6% to factor in lower tax rate and lower interest outgo while keep other estimates largely unchanged. We slightly tweak our TP to Rs 2,475 from Rs 2,468. Maintain Buy," the broking firm added.
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