RIL gains 1% ahead of Q1 result today; stock slides 5.5% so far in FY23

RIL Q1 result: Analysts expect Reliance Industries to report a strong set of numbers in Q1FY23, driven by robust oil earnings

Reliance Industries (RIL) Q1 result preview: Reliance Industries shares rose over 1 per cent to Rs 2,517 apiece on the BSE ahead of the company's April-June quarter result (Q1FY23) later today. At 9:20 AM, the shares quoted 0.99 per cent higher at Rs 2,512, as against a 0.5-per cent gain in the S&P BSE Sensex. 

So far in the month of July, RIL shares have underperformed the market by declining 4 per cent on the bourses, as against a 4.5-per cent rally in the BSE's 30-pack index. Moreover, so far during the current financial year (FY23), shares of the Mukesh Ambani-led company have performed in-line with the frontline index. Both of them have shed 5.4 per cent each during the period. 

Analysts expect Reliance Industries to report a strong set of numbers in Q1FY23, driven by robust oil earnings. According to a Bloomberg poll of analysts, the company is expected to post a consolidated net profit of Rs 21,615 crore on net sales of Rs 2.25 trillion. Earnings before interest, tax, depreciation, and amortisation (Ebitda) are likely to come in at Rs 38,474 crore.

Compared to a year ago, the top line will grow 56 per cent, while Ebitda and profit after tax (net profit) will grow nearly 40 per cent and 76 per cent, respectively, based on the Bloomberg consensus estimates for Q1.

"We expect RIL's Q1FY23 Ebitda to jump 33 per cent quarter-on-quarter (QoQ) at Rss 41,800 crore led by sharp spike in refining margin (GRM) to $22 per barrel; this will be partly aided by 3.4 per cent QoQ growth in Digital Ebitda, and 9.0 per cent QoQ growth in Retail Ebitda," said analysts at JM Financial in an earnings preview report.

Oil-to-chemical (O2C) Ebitda, the brokerage said, will likely rise 63 per cent QoQ to Rs 23,200 crore due to strong refining margin amid spike in petrol and diesel cracks to $40-50/barrel on account of supply side concerns. However, petchem margins could remain weak due to weak polyester margins on account of Chinese lockdowns.

Moreover, digital Ebitda could rise to Rs 11,600 crore due to rise in ARPU (average revenue per user) to Rs 174 (from Rs 168 in Q4FY22); net subscribers are likely to rise by 4.5 million sequentially (vs net subscribers decline of 11 million/9 million/11 million in Q4FY22/Q3FY22/Q2FY22 due to cleaning up of low-ARPU inactive subscribers). Retail Ebitda is pegged at Rs 4,100 crore.

Refining is part of the oil-to-chemicals (O2C) vertical of RIL, contributing close to 60 per cent of revenue and nearly 50 per cent of Ebitda. Besides refining, petrochemical and fuel retail are also part of the O2C business. Retail and telecom, on the other hand, account for 34 per cent of revenue and nearly 45 per cent of Ebitda.

Eye on commentary

According to Mayuresh Joshi, head of equity research at William O'Neil India, investors will closely track the management's assessment of gross refining margin (GRMs) amid a fall in crude oil prices. Singapore GRMs have crashed from $30 per barrel to about $4 per barrel within weeks. Historically, RIL has enjoyed premium of $ per barrel over Singapore GRMs. 

"However, since retail and telecom, now, account for over 50 per cent of Ebitda, the demand environment, digital intergration, and other initiatives in the space will assume importance. Besides, accelerated progression in the (hiving off of) O2C business, and capex plans for green energy will be tracked," he said.