Shares of Reliance Industries fell 4% to Rs 2,404 in intraday trading on BSE on Monday after the company reported a lower-than-expected consolidated net profit for the quarter ended June 30, 2022 (Q1FY23), Rs 17,955 crore (Q1FY23), up 46.3% year-on-year. A Bloomberg survey of analysts estimated net profit at Rs 21,615 crore.

The oil and telecommunications group posted total sales of Rs 2.43 trillion for the quarter, up 53% year-on-year. First-quarter consolidated EBIDT (earnings before interest, depreciation and tax) rose 45.9% year-on-year to Rs 40,244 crore, beating expectations of Rs 38,474 crore.

Results were lower than expected due to lower-than-expected O2C profitability. O2C Ebitda was Rs 19,888 crore, up 62.6% year-on-year. However, ICICI Securities said we understand it was lower than expected due to higher crude oil procurement and operating costs.

“In Q2FY23E-TD, global refining margins retreated from their peaks in Q1FY23. In addition, windfall taxes on fuel exports will limit refining profitability. Companies have relatively strong balance sheets, and investments in new energy verticals will be key monitorable, going ahead” the brokerage firm said in a note.

Management believes recovery in aviation demand, easing the pandemic, and lower exports from China will support product margins. While PX, PTA and MEG margins are expected to be range-bound due to excess capacity, polyester/polymer demand will likely improve in the upcoming festive season.

In an update, Motilal Oswal Financial Services said: “Using SOTP, we value FY24 EV/EBITDA at 7.5x for the refining and petrochemical segment and Rs 721/share for the standalone business. We attribute RJio and the equity valuation of Rs 1,173/share to consider by the recent equity sale; we have improved our EV/EBITDA multiple to 39x in retail and 18x in digital services, highlighting new growth opportunities and solid market share gains in digital.”