Will RIL disappoint D-Street this quarter with muted profit growth?

MUMBAI: Oil-to-telecom conglomerate Reliance Industries (RIL) may deliver muted profit growth when it unveils June quarter earnings on Friday due to challenges in the refining and petchem segment.

However, telecom arm Jio and retail business may drive performance, analysts said.

IDBI Capital expects RIL’s PAT (profit after tax) to grow 0.6 per cent from a year ago, but decline 3.9 per cent from the previous quarter, while revenues may rise 19 per cent from a year ago, but drop 1.1 per cent from a quarter ago.


IDBI Capital expects gross refining margins (GRMs) to decline to $8.2 a barrel from $10.5 a barrel in Q1FY19 while petchem may margin may decline to 18 per cent from 19.5 per cent. It expects RIL’s retail segment to grow 5 per cent sequentially.
Hong Kong-based CGS-CIMB Securities expects RIL’s June quarter consolidated Ebitda (earnings before interest, tax, depreciation and amortisation) to slip 2.8 per cent year on year while net profit may grow 3 per cent year on year and shrink 6 per cent quarter on quarter.

“Petchem margins have weakened significantly while refining has yet to materially improve from the lows of 4QFY19,” CGS-CIMB said in a note on July 15. “We expect Q1FY20 net profit to drop 6 per cent QoQ despite growth in digital/retail earnings. Deal to get external investors into demerged assets is still pending,” it said.

“While RIL has generally managed to outperform our earlier quarterly earnings estimates, the positive earnings have been marred by unusually large increases in capex, with the result that effective net debt levels have remained elevated and above our estimates,” GS-CIMB said.

Edelweiss Securities said while GRM will recover slightly at RIL on a sequential basis, this will be offset by lower olefin and intermediate margins at petchem, leading to a slight 1 per cent QoQ decline in standalone Ebitda.

“Higher earnings at Jio and retail will lead to flattish consolidated Ebitda at RIL, while higher interest costs will lead to a 4 per cent drop in profit after tax,” Edelweiss Securities said.

Goldman Sachs expects RIL’s June quarter Ebitda to slip 3 per cent year-on-year.

“Despite a tough macro environment for both refining and petchem segments, RIL earnings will likely remain resilient and much better than peers,” Goldman Sachs analysts said in a note on July 15.

“This will be driven by high level of complexity and diversified feed mix of the hydrocarbon business and continued growth in consumer-facing businesss,” Goldman Sachs said.