RIL Q1 results today: Key things to watch out for

Mumbai: Reliance Industries Ltd (RIL) is likely to report an increase in its quarterly profit led by stronger petrochemical margins, offsetting weaker refining margins. RIL, which operates the world’s largest refining and petrochemicals complex at Jamnagar in Gujarat, will report its earnings on Friday. According to a Bloomberg poll of nine brokers, RIL is expected to post consolidated net sales of Rs 1.269 trillion crore for the first quarter ended 30 June. A poll of 10 brokers estimate the company to post a net profit of Rs 9,554 crore.

A year ago, net sales stood at Rs 90,537 crore and net profit at Rs 9,108 crore, respectively.

“Overall, we expect Ebitda and profit after tax to witness 48% and 17% year-on-year growth, respectively,” said Credit Suisse Securities (India) Pvt. Ltd in its report dated 11 July. Ebitda stands for earnings before interest, taxes, depreciation and amortisation and is an indication of a company’s profitability.

Analysts expect RIL’s gross refining margin (GRM) to be in the range of $10-11 per barrel against $11.9 per barrel that it reported a year ago. GRM is what a refiner earns by turning a barrel of crude oil into refined products.

During the quarter, the Singapore Complex GRM was down 6% year-on-year to $6 per barrel against $6.4 per barrel in Q1FY18. Crude oil price, however, continued its upward trend in April-June quarter. Average Brent crude price was up 48% year-on-year and 11% quarter-on-quarter to $74.5 per barrel.

“We estimate RIL’s petchem earnings to grow by 10% quarter-on-quarter due to steady margins and higher volumes though the same will be offset by 8% decline in refining from weaker GRM. We estimate Ebitda to be up by 2% on quarter though net profit would decline 2-3% due to higher interest cost (from forex loss) and lower Other Income” said Emkay Global Financial Services Ltd in a report dated 6 July.

“Given the softness in light distillate yields (gasoline, naphtha and LPG) and LPG margins, we expect RIL’s GRMs to decline by $0.8 per barrel quarter-on-quarter. Diesel margins have been stable,” added Credit Suisse.

On the petrochemicals front, analysts expect higher petchem volumes to offset softness in refinery Ebitda. Petchem margins have been mixed but volumes should increase. “Petchem segment is expected to do better, led by healthy petchem deltas and strong volume growth,” said Motilal Oswal in its report.

RIL’s telecom venture Reliance Jio Infocomm, which clocked standalone net profit at Rs 510 crore in the March quarter, is expected to post good growth in the June quarter.

Analysts expect Jio’s profit to increase to around Rs 600 crore led by 15% subscriber growth to 21.5 crore subscribers. Ebitda is expected to grow by 3.4% quarter-on-quarter. In the fourth quarter of last fiscal, Jio had clocked 3.5% revenue growth and 3.8% ebit growth quarter-on-quarter.

The RIL stock, which has rallied 21% in 2018 on top of a 70.5% surge in the previous year, closed at Rs 1110.35, down 0.33% on Thursday.