Moneycontrol
Last Updated : Apr 27, 2018 10:08 AM IST | Source: Moneycontrol.com

Reliance Industries crosses Rs 1,000 mark ahead of Q4 earnings; here are 5 factors to watch out for

Profit after tax for the quarter is expected to be at Rs 9,635.2 crore, an increase of 2.25 percent quarter-on-quarter and 19.8 percent year-on-year, according to average of estimates of analysts polled by Reuters.

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Shares of Reliance Industries opened at record high and crossed the Rs 1,000 mark in the early trade on Friday ahead of its fourth quarter numbers to be declared later today.

The company  is expected to report a net profit of Rs 9,635.2 crore for the March quarter, an increase of 2.25 percent quarter-on-quarter and 19.8 percent year-on-year, according to average of estimates of analysts polled by Reuters.

Reliance, India's second largest company by market capitalisation, will  report its fourth quarter earnings  on April 27.

Apart from petrochemical and refinery businesses, the telecom segment is closely watched by the Street. The telecom segment had posted a profit in the December quarter.

Ahead of earnings Thursday, the stock price closed half a percent higher at Rs 975.35 amid high volumes. The shares shed 4 percent in the last quarter of FY18 after a 17 percent rally in the preceding quarter and a 34 percent rally in the whole of FY18.

The Mukesh Dhirubhai Ambani Group company is also going to consider and recommend dividend on equity shares on Friday.

Here are the key factors to watch out for in its earnings:

Reuters Poll

Profit after tax for the quarter is expected at Rs 9,635.2 crore, an increase of 2.25 percent quarter-on-quarter and 19.8 percent year-on-year. Operating income is seen rising 2.6 percent QoQ and 38.2 percent YoY to Rs 18,043.6 crore.

Petrochemical Business

Petrochemical business, which contributed 24 percent to gross revenue and reported 20.5 percent sequential growth in Q3 (more than 47 percent growth YoY), is likely to continue to perform strong in the March quarter as well due to capacity expansion and higher volumes, analysts said.

"Petchem segment is expected to do better due to healthy deltas and strong volume growth in the segment," Motilal Oswal said in a report. Broker KR Choksey also expects the petchem segment to perform well owing to improved margins supported by a strong volume growth in production at 8.1 MMT (up 30.6 percent YoY, 1.3 percent QoQ).

Edelweiss Securities said petchem earnings are likely to improve 11 percent as new capacities ramp up in addition to robust cracker and polymer margins. It expects continued benefit from US ethane imports and off-gas projects.

Petchem revenue stood at Rs 33,726 crore in the December quarter against Rs 27,999 crore in September quarter, with EBIT (earnings before interest and tax) growth of 16 percent QoQ (up 73 percent YoY) at Rs 5,753 crore in Q3FY18.

"Petrochemicals segment EBIT was at a record level supported by strong volume growth, higher margins for Polypropylene and downstream polyester products. The volume growth was led by the world’s largest ROGC coming on-stream along with downstream LDPE, LLDPE and MEG plants," RIL had said in its filing.

Refinery Business

Gross refining margin (GRM) is another key point to watch out for in the March quarter.

"Singapore complex GRM stood at USD 7 a barrel in Q4FY18 versus USD 7.3 a barrel in Q3FY18 and USD 6.4 in Q4FY17. We expect marginal inventory gain during the quarter. Average Brent crude price was up 24 percent YoY and 9 percent QoQ to USD 67 a barrel," Motilal Oswal said while expecting the Reliance to clock GRM of USD 11.4 a barrel, led by strong benchmark (premium of USD 4.4 a barrel).

Analysts have factored a GRM in the range of USD 11 to USD 11.6 a barrel in their expectations. KR Choksey's estimate of USD 13.7 dollar is an outlier. The broker has a buy rating on the stock with a target price of Rs 1,600 per share.

Gross refining margin was USD 11.6 a barrel in December quarter 2017 against USD 12 a barrel in September quarter and USD 10.8 a barrel in December quarter 2016.

Refining business, which contributed more than 50 percent to total revenue, grew by 8.7 percent QoQ and 23 percent YoY to Rs 75,865 crore in December quarter with EBIT falling 6.9 percent QoQ and 0.5 percent YoY.

Telecom

Analysts will also be closely watching the performance of the telecom arm Jio, after the business reported its first ever quarterly profit within six months of starting commercial operations. Segment profit stood at Rs 504 crore in the December quarter against loss of Rs 271 crore in September quarter.

Reliance Jio added around 190 million subscribers in March quarter against 160 million in December quarter.

Motilal Oswal said positive developments in the telecom business would drive growth further for the company and core segment performance is expected to be strong going forward.

Operating revenue of its telecom business increased 11.9 percent sequentially to Rs 6,879 crore with EBITDA (earnings before interest, tax, depreciation and amortisation) growth of 82.1 percent at Rs 2,628 crore and with margin improvement of 1,470 basis points at 38.2 percent in Q3FY18. Its EBIT grew by 453.1 percent QoQ to Rs 1,436 crore.

Other Factors

Also of interest will the retail business, which contributed 13 percent to gross revenue. This segment it had reported 28.3 percent sequential growth (up 116.4 YoY) in revenue in December quarter with EBIT growing 45.8 percent QoQ and 110.8 percent YoY.

"Retail business is also doing well with high double-digit growth in revenue and EBITDA," Sharekhan said.

Overall the performance of shale gas business (that had reported loss in December quarter), petchem margins, progress on remaining core expansions and update on telecom business will  be monitored by the Street.

Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
First Published on Apr 27, 2018 09:30 am
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