Sequential improvement likely for RIL PERFORMANCE

For Mukesh Ambani's Reliance Industries (RIL), the Marchended quarter might prove sequentially better, on the back of refining and petrochemical segment performance, analysts say.

“We expect strong earnings, driven by refining and petchem (higher volumes, improved margins). Despite increased losses in domestic E&P (exploration and production), we expect RIL to report a ninth straight quarter on quarter stand-alone PAT (profit after tax) growth,” analysts with Nomura Research wrote in an April 7 report.

In a Bloomberg poll, 16 analysts estimated the March quarter revenue at ~67,476 crore and profit at ~8,016 crore at the standalone level. For the March 2016 quarter, the company had reported a net profit of ~7,320 crore and revenue of ~54,189 crore on a standalone basis.

Analysts expect gross refining margins (GRMs) for the quarter in the range of $10.5 to $11.2 a barrel, against $10.8 in the quarter ended December 2016. Brokerages HDFC Securities, Kotak Securities and IDFC Research expect GRM to remain flat or decline sequentially. However, JP Morgan, Elara Capital, ICICI Securities and Jefferies expect GRMs to be sequentially higher.

The oil to telecom conglomerate will report its March-ended quarter and financial year 2016-2017 financial performance. While, analysts see a sequential improvement in the company’s performance, all eyes continue to remain on the company’s telecom division.

“We expect RIL earnings to be marginally better, quarter on quarter, largely driven by strength in chemicals. The key focus will be on R-Jio (the telecom entity), however, which recently announced that 72 million subscribers had signed up for the company’s Jio prime service, thus starting the longanticipated monetisation of the telecom business. Project updates for ROGC (Off Gas Cracker Project) and the petcoke gasifier are also key,” Amit Shah, analyst with BNP Paribas, wrote in an April 6 report.

The company announced completion of its Ethane project early this week, saying it had started supply to its three manufacturing facilities. “RIL’s grandiose $20 billion core capex is seeing fruition, which, unlike the uncertainties associated with Reliance Jio, will instantly bolster earnings. One of the major core projects, the $1.5 bn ethane import from the US, has been commissioned. The highly competitive ethane import will replace the existing expensive propane feedstock to RIL’s crackers, generating savings of $350 million and healthy project RoCE (return on capital employed) of 18 per cent,” wrote analysts with Edelweiss Securities in an April 20 report.

The telecom venture started Reliance Industries Quarter ended (in ~crore) 2016 Turnover Jun 59,493 Sep 64,344 Dec 66,606 its commercial operations from April 1, though it continues to remain heavily discounted. In the management forecast to be shared on Monday, analysts will look for clarity and revenue expectation for this business.