RIL Q2 Result Preview: Double-digit growth likely in earnings parameters, driven by retail, digital segments

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Billionaire Mukesh Ambani-owned Reliance Industries is expected to clock double-digit growth in key earnings parameters for the September quarter on a year-on-year basis, driven by the retail and digital segments.

The Reliance stock price hit a record high of Rs 2,750 on the BSE on October 19, with a market capitalisation of almost Rs 18.3 lakh crore. The stock had a strong run-up recently after the company signed several deals in the solar energy business. It has gained 24 percent since the beginning of July.

The September quarter earnings, to be declared on October 22, will likely decide the direction of the stock price.

Experts said Reliance’s retail and digital businesses, which accounted for 32.4 percent and 18.5 percent of total revenue, respectively, could be the stars in the September quarter, driving double-digit growth in every earnings parameter.

“Retail and digital business will post a strong recovery,” Motilal Oswal said in its earnings preview. The brokerage, which has a ‘buy’ call on the stock, expects consolidated EBITDA (earnings before interest, tax, depreciation and amortisation) growth of 24 percent YoY, driven by the retail and digital businesses, and revenue growth of 34 percent YoY.

Motilal Oswal expects the oil-to-chemical segment’s EBITDA to grow by 39 percent, Reliance Jio’s EBITDA to increase by 21 percent, and retail EBITDA to grow by 38 percent from a year earlier.

Yes Securities expects Reliance to report better earnings (QoQ and YoY) on improved retail profitability and refinery margins.

The benchmark Singapore gross refining margin (GRM) was at $3.7 a barrel, the highest in the past seven quarters, improving further QoQ in Q2 of FY22, led by better gasoline, aviation turbine fuel and naphtha cracks amid hurricane-led supply disruptions, said Motilal Oswal. GRM is a measure of the amount that refiners earn from turning each barrel of crude oil into fuel products.

Brent crude prices averaged $73 a barrel in Q2, a jump of about 70 percent YoY and 6 percent QoQ, due to supply-side disruptions and inventory shortages. This despite OPEC+ easing production cuts starting in August. Recent hurricanes in the US have taken out more than 25 million barrels of offshore production, said Motilal Oswal.

Brent prices have been increasing and crossed $86 a barrel on October 21 for the first time since October 2018. The rally in prices is largely because of expectations of strong global growth, power outages mainly in China, and supply concerns.

Kotak, too, expects strong earnings growth at Reliance for the quarter, with consolidated profit rising 38.3 percent, EBITDA up 35.1 percent and revenue increasing 32.1 percent YoY.

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