Muted revenue growth, higher profitability for RIL in quarter ending Sept

RIL's refining segment gains are expected to be partially offset by a slump in petrochemical margins and planned shutdowns at the refining facilities

For Mukesh Ambani’s Reliance Industries (RIL), analysts estimate higher profit growth for the July-September quarter (second quarter, or Q2) of 2023-24 (FY24), while revenue growth is expected to remain subdued.

Key monitorables include guidance on new energy capital expenditure, retail expansion, and telecommunication (telecom) tariffs.

In a Bloomberg poll, 12 analysts estimated consolidated revenue at Rs 2.24 trillion, while five analysts projected adjusted net income at Rs 17,961 crore.

A year ago, RIL reported a net profit of Rs 15,512 crore and consolidated revenue of Rs 2.53 trillion for Q2 of 2022-23.

Analysts at Systematix noted that the company’s consolidated earnings before interest, tax, depreciation, and amortisation (Ebitda) is estimated to grow by 28 per cent year-on-year (Y-o-Y), driven by marginal gains across segments.

In terms of segments, RIL’s upstream business is expected to see sequential gains due to higher crude oil prices.

Analysts from Dolat Capital, in an oil and gas earnings preview note for Q2FY24, wrote, “As indicated in the April-June quarter, RIL’s KG (Krishna Godavari) gas production has increased to 28 million standard cubic metre per day (mscmd) with a peak price realisation of US$12.12/ million British thermal unit (mBtu).”

The oil-to-chemicals (O2C) business is expected to benefit from higher refining margins.

Dolat analysts added, “Russian discounted crude processed accounted for over 30 per cent, which will boost the overall gross refining margins (GRMs).”

Motilal Oswal expects a 40 per cent Y-o-Y rise in Ebitda for the O2C segment.

However, RIL’s gains in the refining segment are expected to be partially offset by a slump in petrochemical (petchem) margins and planned shutdowns at the refining facilities.

In September, RIL announced planned maintenance shutdowns at one crude distillation unit and one delayed coking UNIT in a special economic zone refinery for about four weeks starting from the fourth week of September, fluidised catalytic cracker in the domestic tariff area refinery for about seven weeks starting from mid-September, and refinery off-gas cracker for about four weeks starting from the last week of September.

“We expect RIL’s standalone Ebitda to improve by 9 per cent sequentially as the increase in KG basin gas production and likely sequential improvements in GRMs would be partly offset by weaker petchem spreads quarter-on-quarter,” wrote analysts from Kotak Securities in a note.

As part of RIL’s consumer businesses, analysts at Nomura anticipate a 13 per cent Y-o-Y rise in Ebitda and a 9 per cent Y-o-Y rise in revenue for the telecom vertical.

Regarding RIL’s retail business, analysts at Jefferies stated that core retail revenues per square foot may decline by 16 per cent Y-o-Y due to dilution from the sharp 35 per cent area addition Y-o-Y, yet this should still drive healthy revenue growth of 17 per cent Y-o-Y. Operating Ebitda growth for the retail business, the analysts said, is expected to be at 24 per cent Y-o-Y.

Analysts at Motilal Oswal highlighted that clarity on the Rs 75,000 crore announcements in the new energy business, growth in retail store additions, and any pricing actions in telecom are the key areas to monitor.