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Reliance Industries is expected to report bumper earnings for the quarter ended March led by its refining, telecom and retail business even as the petrochemical operations may exhibit some weakness.
The conglomerate is expected to report a 38 percent year-on-year rise in consolidated net profit at Rs 17,167 crore for the quarter ended March, according to an average of six brokerages polled by Moneycontrol.
The company’s consolidated revenues are likely to rise 43 percent on year to Rs 2.1 lakh crore for the reported quarter driven in large part by a bump in earnings of the refining business.
Analysts expect the refining business of RIL to benefit from the surge in global gross refining margins triggered by sanctions imposed on Russia’s oil exports by Western economies following the country’s invasion of Europe.
Singapore benchmark gross refining margins soared 350 percent on year, and 32 percent on quarter, to $8.1 per barrel in the March quarter that will significantly boost RIL’s earnings from selling refining products.
Further, the surge in prices of middle distillates such as diesel and jet fuel during the quarter triggered by high demand and supply disruptions would further aid earnings of the legacy business of the conglomerate.
“Notwithstanding the stock’s upmove from its recent lows, we believe the strength in refining is being under-estimated, with RIL particularly well-placed in the current environment given a combination of high diesel yield, high diesel output, high export ratio, and high complexity,” said brokerage firm Citigroup India in a recent note.
That said, the performance of the oil-to-chemical business is likely to be tempered by the weakness in margins of the petrochemical division because of higher crude oil prices as well as declining international margins for key products.
Robust Telecom Growth
The telecom operations of RIL will also provide strong support to earnings with brokerage firm Jefferies India expecting a 10 percent sequential rise in revenues.
The surge in revenues will be driven by the full impact of recent tariff hikes undertaken by the industry recently with Reliance Jio Infocomm’s average revenue per user likely to rise by 9-12 percent on a quarter-on-quarter basis.
However, the churn in subscriber base of Reliance Jio is likely to continue in the reported quarter with analysts expecting the company to lose more than 9 million users as it reduces the presence of inactive and low revenue users.
Retail Recovery
Brokerage firm BofA Securities expects the growth momentum for Reliance Retail to improve in the March quarter despite the impact of localized lockdowns in the early part of the quarter due to the spread of the Omicron variant of COVID-19.
“We expect the business momentum to pick-up and expect 30% YoY growth on low-base effect of lock-downs easing up. We also expect the momentum of online apps JioMart and AJIO to be strong,” BofA Securities said.
Brokerage firm Morgan Stanley India expects revenues to rise 15 percent sequentially with similar sequential rise in operating profits. However, the operating performance is likely to be muted on a year-on-year basis due to impact of high competition in the sector and high inflation.
Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
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