Reliance Industries Ltd (RIL) is expected to report muted earnings in the first quarter of 2022-23 despite steady consumer growth as it may be partly offset by a decline in its oil-to-chemical (O2C) business, analysts said.
According to a Bloomberg survey of 14 brokerages, the conglomerate’s consolidated net sales are expected to come in at Rs 2.14 lakh crore and net profit is estimated at Rs 16,995.50 crore according to seven brokerages. The company is scheduled to report its June quarter earnings on July 21.
"EBITDA to marginally increase by 1 percent quarter-on-quarter to Rs 38,800 crore, with O2C EBITDA down 4 percent to Rs 15,600 crore on lower GRMs, partly offset by a recovery in the petchem margins. We expect net subscriber addition of 6.5 million for Jio, with a 1 percent higher ARPU at Rs 180. Retail EBITDA should be up 2 percent QoQ to Rs 5,000 crore, while upstream EBITDA would be largely flat. We estimate consolidated adjusted PAT, after JPL-RRVL MI, to decline 14 percent to Rs 16,500 crore, on higher ETR quarter on quarter at 22 percent," said Emkay Research in a note to investors.
The Mukesh Ambani led-conglomerate hit its 52-week high on the bourses on June 19 at Rs 2,855.00 a share on BSE ahead of the result, driven by the demerger of its financial services arm. On July 20 at closing, shares were settled at Rs 2619.80, up 1.2 percent from its previous close.
Although RIL does not report gross refining margins (GRMs) separately, analysts expect that it would have achieved GMRs of $11 a barrel in the June quarter compared to the implied GRM of $13/barrel in Q4FY23. It is seen following the declining trend in benchmark Singapore GRM, which has plunged over 70 percent year-on-year and close to 50 percent QoQ on weak demand.
The analysts predict that the company's petrochemical EBIT (earnings before interest and taxes) is likely to remain relatively unchanged QoQ due to limited pricing power in the market. The ample supply and insufficient demand are the primary factors contributing to this situation. In the ‘oil and gas’ segment, EBIT is expected to have remained stable, with a modest 1.6 percent QoQ increase in revenues.
Brokerage firm JP Morgan predicts that Reliance Jio will maintain its pattern of quarterly net subscriber additions and experience a slightly higher average revenue per user (ARPU) in the first quarter. As for Reliance Retail, it is expected to achieve a YoY revenue growth of 25 percent. This growth will be driven by the expansion of stores and the acquisition of floor space, particularly in the grocery segment. JP Morgan also foresees that Reliance Retail's revenue growth will surpass that of its competitors in the industry.
"We expect Jio to report strong net adds of 7 million in Q1 (vs 6.4 million in Q4) and largely flattish ARPU leading to overall revenue growth of 1.6 percent QoQ. Jio, unlike Bharti, didn't have any benefits from the minimum tariff recharge. Furthermore, we think as Jio's 5G network is deepening, a lesser number of users did top-ups in this IPL-heavy quarter as 5G provided better speeds," said BofA in its note.
"We expect steady momentum at retail and factor in 22 percent YoY growth (19 percent in Q4) led by continued uptake in grocery and fashion business. We model a flattish QoQ EBITDA margin of 7.1 percent and EBIT margin of 5.4 percent," the report added.
According to analysts, the focus is likely to shift towards expectations for significant announcements during the annual general meeting (AGM), which is anticipated to take place in August. Historically, Reliance Industries Limited (RIL) uses the AGM as a platform to reveal value-unlocking catalysts and outline future growth plans.
At the last AGM on August 30, Mukesh Ambani told shareholders that he will share an update on the planned initial public offer (IPO) of Reliance Retail and Reliance Jio in the AGM next year. Hence, analysts expect noteworthy announcements to be made during this year's AGM.
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