Reliance Q2: Here's what the street is expecting

Moneycontrol Bureau

Reliance Industries (RIL) is all set to declare its September quarter earnings today. Brokerages on an average expect net profit of the company to decline 6 percent Year-on-Year to Rs 5,365 crore, but the same is likely to grow by 20 percent quarter-on-quarter.
Net sales are seen going up by 20.3 percent YoY to Rs 94,500 crore up by 2.9 percent QoQ. What will drive earnings for RIL?
RIL's gross refining margin (GRM)--the difference between the cost of processing crude and the revenue from selling finished petroleum products--is expected to rise anything between USD 9-9.5/bbl versus USD 7.6/bbl,QoQ and USD 10.1/bbl,YoY. Rise in GRMS will help offset comparatively weaker margins from RIL's petchem and exploration and production (E&P) business.
Not only higher GRMs, even the depreciating Rupee and higher other income will boost results says brokerage firm Prabhudas Lilladher which further expect the company's petrochemical segment to see some inventory destocking during the quarter.
The firm also points out the gas output from RIL's KG-D6 basin will decline to 28 million standard cubic metres per day (mmscmd), from 37.8 mmscmd, YoY.
Antique broking re-iterates that the company's earnings will rise on better GRMs which will strengthen at least by 36%,QoQ to over USD 9/bbl. The firm expects RIL's PAT to grow 17% to Rs 5200 crore, QoQ due to uptick in refining margins.
ICICI Securities says segment profit from RIL's petrochemicals business is expected to remain flat, QoQ. Falling gas output KG-D6 field will impact revenue and profitability of the company's E&P business.
Religare points out that petrochemical margins will remain muted during the quarter on lacklustre demand, primarily from China, with an inventory build-up at the producers'  end. "An increase in naphtha prices and cheaper exports from the US made matters worse for naphtha crackers in Europe and Asia," notes the firm.
Motilal Oswal also expects RIL to deliver strong Q2 earnings led by higher GRMs. However, it also points out refining margins have again started to weaken. Also core businesses of RIL( Petchem and E&P) remain volatile.
KR Choksey has also predicted RIL to give a muted performance during the quarter. The firm states that the overall improvement in refining environment particularly expansion in middle distillates would likely enable RIL to clock in better refining margins at around $9.8/bbl when compared with $7.6/bbl QoQ. However, like other brokerages, the firm also expects  petchem margins to be flat, QoQ.