Reliance Industries is expected to report strong growth in petrochemical, telecom and retail segments but that growth is likely to be offset by weak refining business.
Telecom-oil-to-retail conglomerate Reliance Industries is set to announce its second quarter (July-September) earnings on October 17. Analysts largely expect steady set of numbers for the quarter driven by petrochemical and Jio businesses.
The company is expected to report strong growth in petrochemical, telecom and retail segments but it is likely to be offset by weak refining business.
Sharekhan expects Reliance Industries (RIL) to benefit from a weak rupee and higher petrochemical volumes and margins.
The stock rallied 29 percent during the quarter and gained 26 percent year-to-date. It has, though, corrected nearly 12 percent since August 28, when the market touched record high.
Here are five key things to watch out for in earnings:
Consolidated revenue during the quarter is likely to grow 8.5 percent sequentially to Rs 1,39,657.5 crore compared to Rs 1,28,756 crore in previous quarter, according to Reuters estimates.
Petrochemical business is expected to do better led by healthy petchem deltas and strong volume growth. Analysts expect petrochemical segment's earnings before interest and tax (EBIT) growth to be around 8 percent sequentially while refining earnings before interest and tax may be down around 0.5-1 percent QoQ due to fall in margins driven by FCC shutdown.
While maintaining 'Buy' call on the stock, Motilal Oswal said core segment performance of the company is expected to be strong, going forward. "Positive developments in the telecom business should drive growth for the company."
Reuters poll indicated that consolidated profit for September quarter is expected to increase 0.8 percent to Rs 9,534.94 crore compared to reported income of Rs 9,459 crore in June quarter.
"We expect a marginal increase in consolidated profits driven by a higher contribution from Jio, retail and US shale," Kotak said, but Motilal Oswal expects RIL to report consolidated PAT growth of 6 percent QoQ to Rs 10,050 crore.
Gross Refining Margin
Motilal Oswal and Equirus said the Mukesh Ambani Group company is expected to report gross refining margin for the quarter at around $10.2 a barrel against $10.5 a barrel in June quarter while Sharekhan expects the same at $10.6 a barrel.
Brokerage houses feel flat benchmark GRM, sequential decline in light-heavy differential and decline in diesel/petrol crack may impact company's refining margin.
Reuters Singapore Complex GRM was up 2 percent QoQ (up 26 percent YoY) to $6 a barrel in Q2FY19 versus $8.3 a barrel in Q2FY18 and $6.1 a barrel in Q1FY19.
Crude oil price continued its upward trend in September quarter. Average Brent crude price was up 45 percent YoY and 1 percent QoQ at $75 a barrel.
Most analysts expect the Q2 is expected to be another strong quarter for Reliance Jio, driven by consistent addition in subscriber basis, though average revenue per user (ARPU) may remain under pressure.
Kotak estimated Jio's reported profits to increase to Rs 910 crore in Q2FY19 from Rs 610 crore reported in June quarter while Emkay expects Jio EBIT to increase 20 percent QoQ.
Analysts expect strong growth rates to continue in retail business.
Emkay Research sees EBITDA (earnings before interest, tax, depreciation and amortisation) growth at 11 percent in Q2 on sequential basis.
Nomura expects retail revenue to grow 5 percent and earnings before interest & tax to increase 10.2 percent QoQ. EBIT margin may expand 20 bps sequentially.Disclaimer: Reliance Industries Ltd., which owns Jio, is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.