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Reliance Industries (RIL) is expected to post a five to six per cent increase in its first quarter (consolidated) numbers, from strong refining and petrochemical margins.
Standalone net profit could be up 11-12 per cent over a year before. The April-June quarter results will be announced on Friday.
A Bloomberg poll of eight analysts has forecast net profit at Rs 6,211 crore, against Rs 5,957 crore a year before, 4.2 per cent higher. Net sales is expected to be Rs 67,807 crore. RIL has since the begining of financial year 2014-15 begun reporting its numbers on a consolidated basis. “With 12 per cent year-on-year profit after tax growth, we expect another good quarter for RIL and a strong quarter for both its refining and petchem businesses,” said a Nomura Research report. With gasoline cracking being strong and Indian refiners benefiting from discount offerings by West Asia producers, RIL's gross refining margins (GRMs) are expected to be $9.3-9.5 a barrel, driven by higher product cracks. GRMs are earnings from turning every barrel of crude oil into fuel. During the quarter, Brent crude averaged $62 a barrel. Singapore complex GRMs declined $0.5 a barrel to $8. RIL's refineries have traditionally enjoyed a $3-4 a barrel premium over Singapore GRMs. “India complex refining margins have surged year on year (y-o-y) but are down quarter on quarter (q-o-q). We have therefore assumed RIL's GRMs at $9.3 a barrel, up seven per cent y-o-y and down eight per cent q-o-q," said an Edelweiss report. The Arab Heavy-Dubai crude spread was $3.8 a barrel, up y-o-y from $3.2 in the first quarter of 2014-15.
Bank of America Merrill Lynch (BAML) said the trend of inventory loss which weighed on GRMs in the second half of FY15 was likely to reverse. "As such, we expect the premium to Singapore GRM to hold flat q-o-q at $1.5 a barrel."
On petrochemicals, analysts said the segment could again prove a surprise, with better performance on higher cracker margins. Naphtha cracker margins have improved sharply, 62 per cent y-o-y and 57 per cent q-o-q, driving strong earnings in the segment.
"We expect RIL’s petrochemical Ebit (earnings before interest and taxes) to be up 39 per cent y-o-y on robust product margins, both in polymers and polyester, and higher volumes," said BAML.
The petchem numbers would be aided by improved cracker margins, due to high ethylene and propylene contract prices. In polyesters' intermediate segment, paraxylene and purified terephthalic acid margins improved. Those of ethylene glycol declined, due to higher feedstock ethylene prices.
"Polyester margins declined across the board but for an integrated player like RIL, we believe overall margins will expand, offsetting the small decline in refining margins," said JM Financial Institutional Securities.
On the exploration and production front, analysts expect further decline in profits with declining production and lower domestic gas prices. According to BoFMA domestic E&P EBIT is expected to be down 49 per cent y-o-y mainly on 43 per cent y-o-y lower oil price and 14 per cent lower oil and gas production offset by 23 per cent higher gas price.
On the retail front, EBIT is expected to rise by 30 per cent y-o-y. RIL scrip ended up 4.26 per cent at Rs 1050.45 a piece on the Bombay Stock Exchange.
