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Informist, Tuesday, Jan. 14, 2025

 

By Anshul Choudhary

 

MUMBAI – Analysts expect Reliance Industries Ltd. to report a year-on-year rise in consolidated net profit for the December quarter after three quarters of decline. A sequential improvement in refining margins is likely to aid the company's profitability, but the overall margins are seen to be still weak, which will limit the year-on-year growth in net profit to just over 3%.

 

While the company's largest business segment, oil-to-chemicals, is expected to continue to be a drag on overall profit growth, its digital services business is likely to show a strong growth in profits. The digital services houses Reliance Jio, which is likely to stay on the growth path, aided by the tariff hike announced in July. The company's retail segment has shown some improvement sequentially on the back of better demand during the festivals in the December quarter, but growth compared to the previous year is likely to be muted, analysts said.

 

The conglomerate's consolidated net profit may rise to INR 178.30 billion, according to the average of estimates by 10 brokerages. The estimates were in the range of INR 165 billion-INR 185 billion. Brokerages expect the consolidated earnings before interest, tax, depreciation, and amortisation to grow in single digit with some analysts factoring in a sequential improvement in the diesel refining margin.

 

JM Financial Institutional Equities said the company's gross refining margin may improve to $8.6 per barrel in the December quarter, from $7.1 per barrel in the September quarter. Owing to this, the company's net profit is expected to rise nearly 8% on quarter.

 

The digital services business continued to grow in the December quarter, but it still makes a smaller contribution to the overall gross revenue. The oil-to-chemicals and retail businesses together contribute more than 80% to overall revenue and weakness in these segments means the sales growth is likely to be muted. The consolidated revenue of Reliance Industries for the December quarter is likely to rise only 3% on year to INR 2.35 trillion, according to the average of estimates by 12 brokerages. Sequentially, the company's sales growth is seen marginally down. The brokerages' estimates for revenue were in the range of INR 2.26 trillion–INR 2.54 trillion.

 

Shares of the company have largely traded in a range ahead of the earnings, with the stock down nearly 3% in one month. On Tuesday, Reliance Industries shares closed at INR 1,238.75 on the National Stock Exchange, down 0.1%. The company will detail its earnings for Oct-Dec on Thursday.

 

SEGMENTAL PERFORMANCE

The company's Jio business is likely to be the highest growing segment once again, as analysts expect it to continue to benefit from the tariff increase carried out in July. JM Financial and Kotak Institutional Equities expect Jio's average revenue per user to rise 5-7% on quarter to INR 204-INR 208. This is likely to push the digital services segment's earnings before interest, taxation, depreciation, and amortisation for the quarter 18-22% higher on year, estimates by JM Financial, Nuvama Institutional Equities, and Kotak Institutional Equities showed.

 

The company's oil-to-chemicals business, which contributed to nearly 54% of overall gross sales in the previous quarter, is likely to show a slight improvement in profitability as compared to the September quarter. "Refining margins are likely to improve sequentially amid rising product cracks, while petchem (petrochemical) performance will continue to remain weak," brokerage Prabhudas Lilladher said. Estimates by JM Financial, Nuvama Equities, and Kotak Equities show EBITDA for the segment may rise 2-10% as compared with the previous quarter, but fall 3-10% on year.

 

The company's retail business is likely to report an improvement sequentially, driven by better demand during the festival period in the last quarter of 2024. However, the year-on-year figures are likely to remain muted. While Nuvama Equities and Kotak Equities expect the segment's EBITDA to rise 1-2% on year, JM Financial is predicting a decline of 1%. Sequentially, the three brokerages expect the metric to improve 4-9%.

 

Following are the Oct-Dec earnings estimates for Reliance Industries, in billion rupees, based on reports compiled by Informist from 12 brokerages:

 

Brokerage	Net Sales	Net Profit	EBITDA
Dolat Capital Market	2,302.81	179.14	422.23
Elara Securities (India)	2,445.88	182.40	412.74
Emkay Global Financial Services	2,303.59	180.11	419.27
ICICI Securities	2,316.30	182.90	420.80
JM Financial Institutional Securities	2,258.52	175.12	419.28
Kotak Institutional Equities	2,367.16	184.65	424.27
Motilal Oswal Financial Services	2,308.03	177.30	420.94
Nuvama Wealth Management	2,333.38	164.61	400.59
Prabhudas Lilladher	2,537.00	179.50	418.10
Sharekhan	2,308.03	177.30	-
Systematix Shares and Stocks (India)	2,333.38	-	-
YES Securities (India)	2,423.45	-	-
Average	2,353.13	178.30	417.58

 

End

US$1 = INR 86.63

 

Edited by Rajeev Pai

 

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