RIL Q3 Results Preview: Oil-To-Chemicals, Retail To Aid Earnings

Reliance Industries Ltd.’s third-quarter profit and revenue are seen rising as refining, petrochemicals and upstream segments improve and on better retail performance.

The refining-to-retail conglomerate controlled by Mukesh Ambani is likely to see its consolidated net profit (adjusted from extraordinary items) increase 11.6% sequentially and 16.5% over the year earlier to Rs 15,264.4 crore in the quarter ended December, according to an average of analyst estimates tracked by Bloomberg.

• Consolidated revenue of the nation’s biggest company by market value is expected to increase 4.6% over the previous three months and 48.7% year-on-year.

• Operating income is estimated to jump 4.6% sequentially and 26.16% over the year ago.

RIL is set to announce its third-quarter results on Friday.

Oil-To-Chemicals

The O2C segment’s operating profit is expected to rise sequentially aided by an increase in key petrochemical spreads, prices and improved refining margin.

The polyethylene and polyvinyl chloride naphtha spreads—the difference between the final product price and the cost of raw material—have grown 13% and 23% over the preceding three months, respectively, in Q3 FY22. Petrochemical prices increased because of power rationing in China that lead to shutdown of some units, Motilal Oswal said in a report.

Inventory gains and recovery in petrol, diesel and jet fuel spreads are likely to aid refining margin in the third quarter.

The benchmark Singapore gross refining margin rose 62% sequentially to $6 a barrel—the highest in two years.

The Brent crude averaged $79.7 a barrel in Q3FY22 against $73.23 as of September. Usually, higher average crude prices result in inventory gains as refiners are expected to earn more since they purchased oil at a lower rate.

Besides, petrol, diesel and jet fuel cracks have jumped 34%, 113%, and 92% sequentially, respectively, in the third quarter.

Telecom

Reliance Jio Infocomm Ltd.’s subscriber base is likely to grow, helped by its budget smartphone Jiophone Next. It’s expected to add 80 lakh subscribers in Q3FY22. The carrier has 42.86 crore gross and 35.96 crore active users as of November 2021. The telecom regulator is yet to release data for the quarter.

Reliance Jio also continues to gain market share at the cost of a subscriber churn at Vodafone Idea Ltd.

The operator’s revenue and earnings before interest, tax depreciation and amortisation is expected to rise 4.3% and 5.2%, respectively, over the previous quarter.

Its average revenue per user—the amount an operator earns per subscriber per month—is seen to increase 3.5% sequentially due to tariff hikes. Although, the full impact of the tariff hike will be visible in the fourth quarter.

BofA Securities pegs Reliance Jio’s net profit to rise 17.2% year-on-year and 9.3% over the previous quarter to Rs 3,860 crore.

Retail

Reliance Retail Ventures Ltd.’s Ebitda may rise as demand improved across categories during the festive season. Also, lower restrictions on mobility and higher operating days during the quarter are other drivers of the retail segment’s sales.

Emkay Global estimates retail Ebitda to grow 20% sequentially and 13% over the year ago to Rs 3,510 crore.

(The preview has been compiled from the research reports of Motilal Oswal, Kotak Institutional Equities, BofA Securities, Emkay Global and ICICI Securities.)