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Informist, Thursday, Jul 18, 2024

 

By Sayantan Sarkar

 

NEW DELHI – Oil-to-retail conglomerate Reliance Industries Ltd is likely to post a slight uptick in its net profit for the June quarter driven by its consumer-facing businesses, analysts said. However, the company's oil-to-chemical business segment is expected to take a hit during the Apr-Jun quarter, they said.

 

The company's consolidated net profit for the June quarter is expected to rise 3.3% on-year to 165.43 bln rupees, as per an average of estimates from eight brokerage firms. However, the bottomline is likely to fall 12.7% sequentially. The highest and the lowest estimates for net profit are 190.84 bln rupees and 149.99 bln rupees, respectively.

 

Nomura said sustained delivery across RIL's consumer-facing businesses is likely to be offset by weak crude oil refining. Kotak Institutional Equities said in a report that even though the company is likely to post a slight increase in net profit from the previous year, sequentially, the performance had been hit due to weak performance in the oil-to-chemical segment and muted growth in digital services and organised retail. 

 

The consolidated revenue is likely to grow 11.4% on-year and fall 2.0 sequentially to 2.31 trln rupees. The highest projection for consolidated revenue for the quarter is 2.41 trln rupees and the lowest is 2.22 trln rupees.

 

Analysts have pegged the company's consolidated earnings before interest, tax, depreciation, and amortisation, or EBITDA, at 396.85 bln rupees, according to estimates of nine brokerage firms. In the March quarter, the company's EBITDA was 471.50 bln rupees.

 

RIL is scheduled to detail its June quarter results on Friday. The RIL stock has gained nearly 7% since its June quarter earnings. Today, it closed 0.7% higher at 3,173.35 rupees on the National Stock Exchange.

 

RIL gets over 60% of its revenue and the largest chunk of its profit from its oldest business - oil-to-chemicals. This refining and petrochemicals segment is primarily a downstream business of converting crude oil into fuel, yarn, and other petrochemicals.

 

The digital and retail businesses together account for over 45% of the company's operating profit, while its upstream oil and gas business makes up a relatively smaller portion of the pie. RIL, under its upstream business, has partnered with British oil and gas firm BP Plc to jointly invest in its KG-D6 block in the Krishna-Godavari basin.

 

OIL-TO-CHEMICALS

Brokerages estimate EBITDA from RIL's largest business segment to decline by 23% from the previous quarter due to a sharp decline in refining margins, which is partly offset by a recovery in petrochemical spreads.

 

Motilal Oswal Financial Services said the benchmark Singapore gross refining margin declined to $3.5 per barrel in Apr-Jun from $7.3 per bbl in the previous quarter, which affected the profitability of the business segment. Gasoline and diesel cracks also declined 22% and 29% on a quarter-on-quarter basis in Apr-Jun, respectively, the brokerage said in the report.

 

Nuvama Wealth Management said the Singapore gross refining margin fell 16% on year because of weak global product cracks. Gross refining margin is the difference between the price of crude oil and the total value of petroleum products produced by a refinery on per-barrel basis. It is a key indicator of a refinery's efficiency and profitability.

 

According to YES Securities, refining throughput is likely to have increased by 1.7% on a year-on-year basis and 2.3% sequentially to 17.5 mln tn, while the gross refining margin is expected to be at $10.5 per bbl.   

 

Nuvama Wealth Management also said it expects the company's oil and gas segment's EBITDA to rise 30% on-year on increased production from the KG-D6 block, which is likely to be offset by a 20% year-on-year dip in deepwater gas prices.

  

RETAIL

The performance of Reliance Retail Ventures Ltd, the fast-growing consumer business arm of RIL, is likely to post strong earnings for the June quarter driven by higher footfalls in stores, according to analysts. Reliance Retail is the second-largest division for RIL in terms of revenue, and operates grocery, consumer electronics and lifestyle stores such as Reliance Fresh, Reliance Smart, Reliance Digital, Reliance Trends, Hamleys and AJIO.com.

 

Cash profit from operations or EBITDA of the company's retail business is likely to have risen by 17% on-year during the June quarter, analysts from Nuvama Wealth Management said in a report. Motilal Oswal also expects the segment's EBITDA to rise 16% on-year during Apr-Jun to 49 bln rupees.

 

In terms of revenue, the retail business is expected to have grown 14% on a year-on-year basis and 4% compared with the previous quarter to 797.8 bln rupees, according to YES Securities. According to Motilal Oswal, the key monitorable for this business segment will be growth in retail store additions in the quarter ended June.

 

India's largest retailer clocked a net profit of 26.98 bln rupees for the March quarter, up 11.7% on year. Cash profits from operations were 58.23 bln rupees, up 18.5% on year, with EBITDA margin rising by 60 basis points to 8.6%.

 

DIGITAL

RIL operates its digital business under Jio Platforms Ltd, which houses the telecom business of Reliance Jio Infocomm Ltd and other digital and content-related operations. Reliance Jio is India's largest telecom operator.

 

Reliance Jio's revenue is likely to have risen by 2.3% in the June quarter compared with Jan-Mar led by 3% quarter-on-quarter growth in subscribers, according to Motilal Oswal. The brokerage expects the platform's EBITA margin to remain flat. The growth is likely to have been driven largely by subscriber additions, and the growth in the average revenue per user is likely to have seen an uptick as well.

 

Analysts with Kotak Securities said in a report that RJio added 11 mln overall net subscribers during the June quarter with a blended average revenue per user of 182 rupees, steady from the last quarter. The company's subscriber base is likely to have risen 8% on a year-on-year basis and 1% sequentially, Nuvama Wealth Management said in a report. The average revenue per user for the platform is expected to have risen by 2% on-year and 1% from the March quarter, it said.

 

The average revenue per user for RJio is seen stable at 182 rupees with subscribers increasing to 490.8 mln, according to Motilal Oswal.

 

Following are the Apr-Jun earnings estimates for Reliance Industries, based on reports compiled by Informist from eight brokerage firms:

 

Brokerage	Net sales (in mln rupees)	Net profit (in mln rupees)	EBITDA (in mln rupees)
Elara Securities (India)	2,240,296	179,177	412,969
Emkay Global Financial Services	2,324,988	152,793	389,227
Kotak Institutional Securities	2,301,021	160,223	393,128
Motilal Oswal Financial Services	2,337,000	167,000	410,000
Nomura Equity Research	2,409,000	155,000	394,000
Nuvama Wealth Management	2,277,319	149,994	394,185
Prabhudas Lilladher Pvt Ltd	2,391,500	168,400	388,200
Yes Securities	2,222,538	190,942	393,066
Average	2,312,958	165,441	396,847

 

End

 

US$1 = 83.65 rupees

 

Edited by Ashish Shirke

 

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