Reliance Industries Limited is expected to report strong earnings for the quarter ended June, aided by a sharp rise in gross refining margins and strength in its organised retail business.
The oil-to-telecom major is likely to report a 105.7 percent on-year, and 56 percent on-quarter, increase in consolidated net profit to Rs 25,238.8 crore on July 22, according to an average of five brokerages polled by Moneycontrol.
The big jump in bottomline will be driven from the top as consolidated revenue is expected to rise 68.3 percent on-year and 13.6 percent on-quarter, to Rs 2.4 lakh crore in the reporting quarter, as per the Moneycontrol poll.
“RIL expected to report strong growth in earning on both YoY and QoQ basis, backed by significantly stronger refining profitability, along with continued improvement in Telecom ARPU,” brokerage firm YES Securities said in a preview note.
RIL has benefitted from the substantial rise in margins of refining products like diesel and jet fuel during the June quarter in the wake of supply crunch in the European and the US markets.
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EU and the US saw a sharp decline in diesel and jet fuel inventory on the back of strong demand coupled with a decline in supply following the sanctions imposed on Russia’s oil exports.
Russia was sanctioned by most developed economies after it invaded Ukraine in February in one of the biggest geopolitical crisis to hit Europe since the Second World War.
Singapore gross refining margins soared to record highs of more than $25 per barrel in June to average around $18.7 a barrel during the three-month period ended June.
Analysts expect RIL’s gross refining margins to have averaged $22 a barrel in the June quarter, double the level seen in the March quarter. Margins have expanded at a faster rate, thanks to reported processing of discounted Ural crude oil from Russia and exporting the same to Europe and the US.
Similarly, margins for diesel, gasoil and jet fuel averaged $42.1, $31.2 and $36 a barrel, respectively, during the June quarter, much higher than those in the March quarter.
The refining business is expected to be the main driver of earnings for the conglomerate in the June quarter.
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Besides refining, the company’s retail business is expected to continue to strengthen, with brokerage firm Kotak Institutional Equities expecting operating profits to rise 9 percent on a sequential basis driven by higher footfalls and store additions in the quarter.
The first COVID-19 free quarter of operations should drive growth in all segments of the retail business on a sequential basis, given that year-on-year comparisons would be marred by the disruption caused by the second wave in the year-ago quarter.
The telecom business under Jio Platforms is expected to have a strong operational quarter even as topline performance may be muted due to inflationary pressures in the sector.
Analysts expect Reliance Jio’s average revenue per user to rise 4 percent on a sequential basis, the highest in the sector, on the back of around 3 percent growth in revenues.
Jio is expected to see net addition of users in the quarter after multiple quarters of net loss due to its strategy to trim down non-revenue generating SIMs.
Overall, refining, telecom and upstream natural gas businesses are expected to drive a 79.4 percent on-year and 33.7 percent on-quarter rise in consolidated operating profit to Rs 41,924.4 crore, according to the Moneycontrol poll.
Besides the earnings, investors will await the company’s assessment of the current petrochemical industry margins, demand for refining products as well as its outlook on tariff hikes in the telecom sector.
On July 21, RIL stock closed at 2,486.00 on NSE, down 0.68 percent.
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