Reliance Industries Q3: Here's what the street is expecting

Moneycontrol Bureau

Declining KG-D6 volumes and muted gross refining margins (GRMs) are likely to impact Reliance Industries'(RIL's) December quarter earnings, say brokerages. The company's petchem segment may post better numbers, partially offsetting poor show from other businesses.

Analysts on an average expect a 17% year-on-year jump in net profit to Rs 5,200 crore. Revenues may grow around 6% to Rs 90,000 crore, YoY. The company will announce Q2 numbers on Friday. Also Read: Buy Reliance Industries, target of Rs 1050, says Baliga

According to sector experts, these factors will impact RIL's Q3 numbers

GRMs will remain flat at USD 9.5/bbl, QoQ on weak product cracks but may outperform the Singapore complex refinery which averaged at USD 6.5/bbl due to weak seasonal demand and oversupply situation.

KG-D6 output will continue to be a dampener with production slipping around 29% to 24 million cubic meters a day (mmscmd) due to water ingress and other technical issues.

Petchem segment may spring a surprise on good volumes and higher base price effect.

This is what brokerages expect of RIL in Q3

Angel Broking expects the company to post a net profit of Rs 5,108 crore and revenues to be around Rs 89,981 crore. Bhavesh Chauhan, sector analyst from the firm says, "Though RIL is expected to post GRMs at USD 8.5/bbl, it may surprise the market by posting better-than-expected margins similar to Essar Oil which also recorded better GRMs at USD 9.5/bbl in Q3."  He further said, higher other income will boost topline, partly offsetting poor show from exploration and production segment.

Giving a segment wise break-up on earnings, Nomura says the company's E&P segment will see its EBIT decline 7% (YoY) to Rs 800 crore on poor volumes, refining segment earnings too will dip nearly 17% to Rs 2940 crore due to sharp volatility in business environment. However, petchem division will grow 4% to Rs 1810 crore.

Prabhudas Lilladher states, despite a sharp sequential decline in Singapore GRMs to USD 6.5/bbl during the quarter, RIL's refining margins may come in at around USD 9.5/bbl, outperforming the benchmark. The firm expects the company’s E&P and petchem biz to remain subdued and hence profit will dip 7% to Rs 5010 crore, QoQ.

Barclays also expects a tepid quarter for RIL after taking into account flat refining margins and weaker gas volumes which will partly offset gains petchem division gains. "Earnings may remain muted for the ensuing six quarters before the company hikes gas price to USD 9.60/mmbtu after April 2014," it says. For the quarter gone by, profits will be around Rs 5043 crore, down 6%, QoQ, it estimates.