RIL Q3 Results Preview: Higher Petchem Demand, Retail To Cushion Earnings
Reliance Industries Ltd.’s third-quarter profit and net revenue are expected to decline even as demand for petrochemical fuels rise and margin increases.
Consolidated net profit of India’s biggest company by market value is expected to decline 2.8% year-on-year to Rs 11,313 crore in the quarter ended December, according to the average of analyst estimates tracked by Bloomberg. Consolidated revenue is likely to fall 20.9% year-on-year to Rs 1.2 lakh crore, while operating income is estimated to slip 15.6%.
Apart from the increased demand for petrochemicals, a rebound in the retail arm is expected to help cushion parent’s financials. Reliance Industries is set to announce its third-quarter results on Friday.
The petrochemical segment is expected to support earnings as strong demand and weak supply led to an increase in the global petrochemical prices. Demand for polyvinyl chloride—used to make pipes, medical devices and cables—improved in the third quarter as several countries in Asia and the Middle East resumed work after emerging from lockdowns that were imposed to curb the Covid-19 pandemic.
Prices of polyethylene, with extensive usage in the packaging industry, rose because of supply disruption caused by U.S. hurricanes, while polypropylene prices are increasing as consumption of non-woven and film applications for food packaging and in the hygiene sector jumped.
Refining margin will improve only marginally amid a moderate pick-up in global demand for refined products. The cracks or margins on transport fuels like gasoline and diesel remained weak in the quarter ended December.
Prices of Brent crude—the Asian benchmark—rose 4.4% to $44.6 per barrel during the period.
Reliance Jio Infocomm Ltd. added around 6 million subscribers in the quarter ended December and its average revenue per user rose 2.7% quarter-on-quarter to Rs 149 per month, according to estimates.
Analysts expect a weak revenue growth and cost inflation but are doubtful that the operator will push for tariff hikes.
Analysts expect an improvement in Reliance Retail Ltd.’s sales across categories even as margin will take time to recover. EBIT may jump significantly on a sequential basis, but will be down on a year-on-year basis.
Aggressive store addition and the recent JioMart-led online opportunity will provide strong growth potential going forward, they said.
(The preview was compiled using reports from JP Morgan, Nomura, Dolat Capital, Motilal Oswal and Emkay Global Financial Services.)