Earnings preview: What IIFL expects from RIL in Q3

Reliance Industries is all set to report Q3 earnings later today. CNBC-TV18 estimates Reliance to report a net profit of Rs 5200 crore in Q3 as compared to Rs 4,008 crore it reported in the same quarter last year, a jump of close to 30%. Sales are seen going up by 9.9% to Rs 62,500 crore from Rs 56,856 crore on a year-on-year basis and up 8.7% from Rs 57,479 crore on a quarter-on-quarter basis.

Reliance has been a major underperformer for many sessions now. Today though it recovered and intraday was trading up about 7.1%. Market talk has it that the numbers will be stronger than expected. In an interview with CNBC-TV18, Prayesh Jain, IIFL gave his perspective on what he expects from the private oil and gas giant this quarter. Below is a verbatim transcript of his interview. Also watch the accompanying video. Q: First of course on the basics, the refining and the petchem, the margins that are expected to be good, I mean the environment is the best in the last 2-3 years. So in that sense these are two indications of a good set of numbers. What is your estimate? A: Definitely we expect a decent performance from both these segments, especially if you look at the refining margins, we are expecting Reliance to report around USD 9 per barrel GRM this quarter. However, they have not been able to take a complete benefit of this, because they had a maintenance shutdown, so throughput might be slightly lower on a sequential basis. So in that terms they have not derived complete benefits. However, the EBIT margins are expected to improve substantially. In fact, if you look at the EBIT from the refining segment we might see close to around 90% jump on a year-on-tear (y-o-y) basis. That is the kind of leverage Reliance has on improvement in GRMs. In that terms, the refining segment will do pretty well. However, if you look at the petchem segment, the two aspects in the petchem segments, the polyester margins are likely to be better. On the petrochemical side there might be pressure in terms of margins. So overall we expect EBIT margins to be flattish not substantially great. But it is a much better scenario now as against what we were expecting. Because of the surplus capacities in the segment, we are expecting a decline happening but the market scenario has improved substantially with China