The oil & gas major, Reliance Industries (RIL), reported mixed set of numbers on April 18 where net profit came in higher than expected supported by revenues from retail and telecom businesses while petchem and refining businesses disappointed.
The largest company in terms of market capitalisation on the BSE is focusing on making its consumer business as a bigger revenue contributor, as other segments are taking a back seat.
The results were largely in line with estimates, but after the recent run-up in the stock price there could be a possibility of a knee-jerk reaction. Overall, the results are positive and long-term investors have nothing to worry, suggest experts.
The stock has rallied by about 20 percent so far in 2019 and more than 36 percent in the last year.
SP Tulsian, independent market experts in an interview with CNBC-TV18 said that the profits were largely boosted by other income. One thing is there that new generation businesses, retail and digital, are doing extremely well. Both these businesses have contributed Rs 500 crore compared to fall of Rs 1,150 crore in the bread & butter business.
“Looking at the results, the market could take a pause and profit booking in the stock price is not ruled out on April 22,” he said. The overall earnings is a miss from my side, added Tulsian.
Stock market guru, Prakash Diwan in an interview with CNBC-TV18 said that RIL managed to improve margins in the competitive retail segment, and on the telecom side, usage of voice call going up suggest that it will give the company pricing power in the next few quarters.
“I feel that there would not be too much disappointment from the numbers because it was expected that refining and petchem will start taking a backseat somewhere looking at the capex that has come in other business. Hopefully, the market will take in its stride these results,” he said.
Abhijeet Bora, Senior Research Analyst, Sharekhan by BNP Paribas said that RIL reported largely in-line standalone EBITDA as a beat in beat in GRM at $8.2/bbl and higher-than-expected petchem margin at 18.9 percent was offset by lower-than-expected refining throughput at 16mmt.
Reliance Jio net profit largely remained flat Q-o-Q at Rs840 crore and ARPU declined q-o-q to Rs126/subscriber per month. The retail business reported strong 14.5% q-o-q growth in EBITDA.
“We believe that likely strong subscriber additions in the telecom business, sustained high growth in retail business and likely deleveraging of the consolidated balance sheet would act as key re-rating catalyst for the stock. We maintain our Buy rating on RIL,” said Bora.
We have collated a list of top 10 takeaways from RIL Q4 results:
The oil & gas major reported 9.8 percent year-on-year (YoY) rise in the net profit to Rs 10,362 crore for the quarter ended March which was higher than CNBC-TV18 poll of Rs 9,930 crore. The company reported a net profit of Rs 9,438 crore in the year-ago period.
Digital services contributed significantly to profits as Jio continued to maintain its strong customer traction with high-quality network and unmatched value proposition.
Refining business contribution was lower with volatile crude oil price environment, weak light product cracks and subdued demand, RIL said in the statement.
Total revenues, including other income, grew 19.4 percent on a YoY basis to Rs 1.54 lakh crore for the quarter ended March compared to Rs 1.29 lakh crore seen in the year-ago period. However, on a sequential basis, it fell by 9.7 percent.
Increase in revenue was primarily on account of strong growth in Retail & Digital Services businesses which grew by 51.6 percent and 61.6 percent, respectively.
Higher Petrochemical volumes also contributed to growth in revenue, the company said in a filing with exchanges.
Gross Refining Margins (GRMs) for 4Q FY19 stood at $ 8.2/bbl, outperforming Singapore complex margins by $ 5.0/bbl, and largely in-line with Street estimates.
GRM is what a company makes from turning every barrel of crude to fuel.
Rise in interest cost:
Finance cost stood at Rs 4,894 crore ($ 708 million) for the quarter ended March as against Rs 2,566 crore in the corresponding period of the previous year.
This increase is primarily on account of the commencement of petrochemical projects at Jamnagar and Digital Services business. Higher loan balances also contributed to the increase in finance cost.
Organized Retail Business:
Reliance Retail delivered a record-breaking performance in revenue and profits growth for the year 2018-19. The segment revenues for FY19 grew by 88.7 percent on a Y-o-Y basis to Rs 130,566 crore compared to Rs 69,198 crore seen in the previous year.
Segment Revenue for 4Q FY19 grew by 51.6 percent Y-o-Y to Rs 36,663 crore for the quarter ended March compared to Rs 24,183 crore in the corresponding period of the previous year.
Digital Business (Jio):
The net profit of Jio rose by 64.7 percent on a year-on-year basis to Rs 840 crore which was slightly lower than CNBC-TV18 poll of Rs 990 crore. RJIL reported a net profit of Rs 510 crore in the year-ago period.
Subscriber growth has remained steady with net addition during the quarter of 26.6 million. Gross additions stood at 33.2 million inched up after modest disruption in the previous quarter due to transition to the new KYC process. Monthly churn rate stayed much below industry average at 0.75 percent per month.
Crude prices exhibited high volatility during FY19, amidst reduction in global demand projections, OPEC-led production cut and several geopolitical concerns, including sanctions and trade conflicts.
FY19 revenue from the Petrochemicals segment increased by 37.3 percent on a Y-o-Y basis to Rs 172,065 crore. Petrochemicals segment EBIT increased sharply by 51.9 percent to its highest ever level of Rs 32,173 crore ($ 4.7 billion).
Strong integrated polyester chain margins offset weakness across the polymer chain which was impacted by incremental supplies from new US crackers.
4Q FY19 revenue from the Petrochemicals segment increased by 11.3 percent Y-o-Y to Rs 42,414 crore ($ 6.1 billion) mainly due to an increase in price realizations and volumes in PTA, PP, and Paraxylene.
Refining & Marketing Business:
FY19 revenue from the Refining & Marketing segment increased by 28.7 percent Y-o-Y to Rs 393,988 crore from Rs 306,095 crore seen in the year-ago period, primarily on account of higher crude prices during the year.
4Q FY19 revenue from the Refining & Marketing segment decreased by 6.1 percent on a Y-o-Y basis to Rs 87,844 crore while Segment EBIT declined by 25.5 percent Y-o-Y to Rs 4,176 crore.
Network18 Media & Investments Limited reported 4QFY19 consolidated revenue of Rs1,231 crores, down 23 percent YoY on a comparable basis, due to higher base on account of movie Padmaavat last year.
4Q ex-film revenues dipped 7% YoY led by flux around the implementation of the new tariff order, and some live entertainment projects and union budget coverage in the base quarter which were absent this year.
Oil & Gas Business:
Q4FY19 revenues for domestic E&P operations stood at Rs 520 crore for the March quarter reflecting a 13.8 percent Y-o-Y decrease due to lower production because of natural decline and cessation of production from MA field of KGD6. The segment EBIT was Rs 96 crore for the quarter.
Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.