Billionaire Mukesh Ambani-owned Reliance Industries is likely to see some impact of COVID-19-led lockdown on standalone business but consolidated earnings are expected to be supported by telecom unit with overall strong margin expectations, brokerages feel.
The company will announce its quarterly earnings on July 30.
Motilal Oswal feels it could be a mixed quarter for Reliance Industries as it expects the company to report gross refining margin (GRM) at $9.0 per barrel for the quarter ended June 2020 against $8.1 a barrel in Q1FY20 and $8.9 a barrel in Q4FY20), helped by inventory gain as well as discounts offered to Indian refiners at the beginning of the quarter.
"Lower petchem volumes are likely to be offset by margin improvement. We expect consolidated EBITDA at Rs 20,700 crore (down 3 percent YoY and 5 percent QoQ) and standalone EBITDA at Rs 11,400 crore (down 16 percent YoY, flat QoQ)," said the brokerage which sees consolidated profit declining 1.5 percent YoY but rising 4.3 percent QoQ to Rs 9,993.2 crore for the quarter ended June 2020.
Its consolidated EBITDA margin is expected to remain strong at 17.4 percent during the quarter against 16 percent in Q4FY20 and 13.6 percent Q1FY20, said Motilal Oswal, adding even profit margin may remain strong at 8.4 percent for the June quarter against 7 percent in Q4FY20 and 6.5 percent in Q1FY20.
"The company's margins will improve due to flexible feedstock utilization and better O2C integration," said the brokerage.
"Q1FY21 was caught right in the center of the global pandemic (COVID-19) and saw huge volatility in crude prices. Owing to the lack of product side demand, Singapore GRM quarterly average came in negative – the lowest in the last two decades. Brent price average in Q1FY21 stood at $31.4 a barrel (in line with estimates $30 a barrel)," it added.
On the Jio front, Kotak Institutional Equities expects EBITDA to increase by Rs 1,060 crore QoQ led by a modest rise in subscriber base to 396 million and ARPU to Rs 137 per month.
Led by one extra day during the quarter and flowthrough of December 2019 tariff increase, Dolat Capital expects Jio to report 6.4 percent QoQ growth (35.1 percent YoY) in revenues led by 3 percent increase in average subscribers and 3.3 percent uptick in ARPU to Rs 135.
"EBITDA/adjusted PAT could increase by 7.9/6.8 percent QoQ and 42.7/179.4 percent YoY respectively. PAT growth to trail EBITDA due to low tax outgo in Q4FY20," the brokerage said.
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Reliance Industries during the quarter raised more than Rs 1.68 lakh crore through stake sale in Jio Platforms and rights issue. Along with the earlier stake sale to BP in the petro-retail JV, the company achieved its net debt free target in June 2020 - well before its target of March 2021.
The stock rallied 54 percent during the quarter ended June 2020 and gained 39 percent in 2020 so far.Disclaimer: "Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd which publishes Moneycontrol."