Oil-retail-to-telecom conglomerate Reliance Industries is expected to report strong set of earnings for the quarter-ended December 2018 driven by retail, telecom and petrochemical businesses. But slightly weak performance in refining segment may impact profitability.
The country's largest company by market capitalisation will announce its December-quarter earnings on January 17. The key data points to look at in results would be the growth in retail, telecom and petrochemical businesses.
"Petrochemical segment is expected to do better due to healthy deltas and strong volume growth in the segment. Positive developments in the telecom and retail segments should drive growth further for the company," Motilal Oswal said.
Antique Stock Broking said consolidated profit could be marginally higher QoQ (and up 3 percent YoY) on robust profitability in retail segment, coupled with healthy earnings in Jio, lower interest cost and higher other income. This could offset weakness in refining and petrochemical margins.
Retail/digital business profits are likely to grow by 6 percent/ 10 percent sequentially, IDBI Capital said.
Most analysts expect gross refining margins (GRMs) at around $8-9 a barrel for the quarter-ended December 2018 against $9.5 a barrel in the previous quarter and $11.6 a barrel in Q3FY18.
In comparison, benchmark Singapore GRM declined sharply by 30.3 percent QoQ to $4.3 a barrel in Q3FY19 due to weakness in gasoline and naphtha crack spread.
International benchmark Brent crude fell 35 percent in December quarter and 6 percent in 2018 on expected slowdown in demand growth led by global recession and higher non-OPEC outputs.
"We expect earnings of Reliance Industries to get impacted by weakness in refining margin (expect GRM of $8.5 a barrel in Q3FY19), partially offsetting the benefit of weak rupee and higher petrochemical margins (due to feedstock cost advantage)," Sharekhan said.
Consolidated revenue growth is expected to be strong on-year basis, but could be flat on sequential basis, said analysts who expect around 30 percent growth in topline YoY.
"Higher oil prices (+10.9 percent YoY), depreciating INR (+11.5 percent YoY), higher petchem volumes (+16.3 percent YoY) will drive robust revenue growth," Edelweiss said.
Key issues to watch for:
> Petrochemical margins
> Update on telecom venture
> Future capexDisclaimer: Reliance Industries Ltd, which owns Network 18, is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.