'One of the best ever performances RIL has put up'

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26 Aug, 2025 12:21

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Terming Reliance Industries third-quarter earnings as "one the best ever performances" by the company, Mayuresh Joshi of Angel Broking said the energy major's gross refining margins (GRMs) were in line with expectations while numbers of the refining business were ahead of expectations.

"With the petcoke gassification and PTA plants coming on stream, the numbers will only improve," Joshi said, even though he added that the company's GRMs -- at USD 11.50 per barrell -- were high and may get normalized.

Sudeep Anand of IDBI Capital Markets said the RIL's Q3 net profit of Rs 7,290 crore were ahead of his expectation of Rs 6,980 crore.

Excerpts from the interview on CNBC-TV18.Latha: Is this inline or is it above your expectations?Joshi: Refining bang inline with what we were predicting. Petchem definitely surprised us both in terms of the absolute numbers and margins coming in at 14.4 percent.The important and pertinent point that I would like to raise is that expectations are always high and again I think that 11.5 number has come through, the market expectations were at 12 percent. I think it is good for the stock in a way that it normalized the expectations going forward as well because you cannot expect Reliance to keep on beating this number quarter after quarter. However having said that once these planned capacity expansions and the core capex that they have probably done specifically in terms of the petcoke gasification plant which will aid the refining margins going forward as well, I think that is going to be a big kicker for Reliance from FY17 onwards. Similarly on the petchem side, once you are looking at the off-gas cracker coming through and you are probably looking at the Purified Terephthalic Acid (PTA) plants coming through, you are probably going to see some amount of respite, even if you see the polymer and the polyester spreads probably getting determined by the supply demand dynamics in China. So, clearly it has out beaten expectations in terms of petchem performance, refining probably has been inline with expectations and probably is one of the best performance that Reliance has put up today. So, operationally the tax rates have been normalised, you are probably looking at no contribution incrementally happening from other income as well. So, it is an operational beat that has come in through. The throughput numbers that Anuj mentioned I think exceptionally good. So, over the past few quarters you have actually seen Reliance actually generate at around 110 percent in terms of throughput.Anuj: The stock has priced a lot of this in. Tomorrow morning what do you see on the stock? Do you see another rally, may be another 3-4 percent or do you think most of the good news is now in the price?Joshi: The expectations were running high. So, you might see some disappointment probably coming through. However you always have to see the large picture with Reliance and as I was mentioning earlier as well, they are almost at the end of their capex programme. What this effectively means is that the cash flows will now start improving because no capex is probably expected to come through incrementally at least on the core businesses, that is petchem or refining. Once those capacities start getting commissioned from the first half of FY16, FY17 numbers will be exceptionally good and consider that base over FY16.So, even if you see some amount of downside on to the stock, our own take is that the cash flows would improve, the RoEs which have probably got depressed because of the non-core capex specifically on the telecom part of almost Rs 1 trillion, I think even that will start contributing in a year, year and a half's timeframe. So, a lot of more positives are probably into the stock in terms of operational capabilities coming through. So, I will not be perturbed if the stock does correct tomorrow. In my opinion it might start lower. Clearly it becomes a very good buying opportunity for long term investors but this is not a stock that has to be seen on a quarter on quarter basis. If you look at FY17 numbers and if you predict those numbers I think they will be far better in our estimates compared to what FY15 and FY16 have given.Latha: Your first thoughts after looking at both the GRM margins and the EBIT?Anand: Results are definitely above our expectations mainly in led by petrochemicals segment. Though the refinery segment, GRM is in line with our expectation of USD 11.5 per barrel. However, EBIT of refinery segment is above our expectation of USD 61.3 billion.On petrochemicals segment we were expecting a margin of 12.7 percent while they have deported a very robust 14.4 percent, so that is clearly a beat. Overall our expectation for Rs 6,980 crore which they have surpassed significantly so result is definitely ahead of your expectation.Anuj: The stock has priced a lot of this in. Tomorrow morning what do you see on the stock? Do you see another rally, may be another 3-4 percent or do you think most of the good news is now in the price?Joshi: The expectations were running high. So, you might see some disappointment probably coming through. However you always have to see the large picture with Reliance and as I was mentioning earlier as well, they are almost at the end of their capex programme. What this effectively means is that the cash flows will now start improving because no capex is probably expected to come through incrementally at least on the core businesses, that is petchem or refining. Once those capacities start getting commissioned from the first half of FY16, FY17 numbers will be exceptionally good and consider that base over FY16.So, even if you see some amount of downside on to the stock, our own take is that the cash flows would improve, the RoEs which have probably got depressed because of the non-core capex specifically on the telecom part of almost Rs 1 trillion, I think even that will start contributing in a year, year and a half's timeframe. So, a lot of more positives are probably into the stock in terms of operational capabilities coming through. So, I will not be perturbed if the stock does correct tomorrow. In my opinion it might start lower. Clearly it becomes a very good buying opportunity for long term investors but this is not a stock that has to be seen on a quarter on quarter basis. If you look at FY17 numbers and if you predict those numbers I think they will be far better in our estimates compared to what FY15 and FY16 have given.Disclaimer: Reliance Industries owns Network18, which publishes Moneycontrol.com.